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Other Services: The Portfolio Update Bulletin Service FAQ

When and how do you make the quarterly switches?

We use calendar quarters, issuing a Portfolio Update Bulletin at the start of the following month. Changes are then enacted at the start of the next month, giving clients around 4 weeks to respond to the proposed changes before any switches are enacted. Therefore, portfolios are effectively one month lagged and the figures provided will fully take this into account.

For example, the first quarter of 2010 runs from the start of January 2010 to the end of March 2010. The Portfolio Update Bulletin for Q1 2010 would be issued to you at the start of April 2010. You should ensure that all clients have responded by the end of April 2010 and switches will be enacted at the start of May 2010. This means that the Q1 2010 portfolios will still be in place for the first month of Q2, hence the one month lag. All provided figures will fully take this lag into account.

What do I have to do when I receive monthly and quarterly information from you?

At the start of each month you will receive the Portfolio Update Mini-Bulletin via email. This will give you the month end figures. These should be inputted into your Pension Performance Review Process template as outlined in the instruction manual. Attached to the email will be Skandia/SIS u-skan print outs corresponding to the month end figures. These should be filed in your Portfolio Update Bulletin Service folder. Shortly after the end of the calendar quarter you will receive a customised Portfolio Update Bulletin along with justification and fund factsheets on any newly recommended funds. Once you are happy with the recommendations, you should print a copy of these documents for your file and send the Portfolio Update Bulletin to each of you clients. We also suggest sending a recently obtained valuation statement available via the Skandia/SIS website with an attachment of the fund fact sheets of any newly recommended funds that apply to the individual portfolio. Along with the Portfolio Update Bulletin, you will also receive text for 5 emails that can be used to form the body of your client correspondence. Once this has been sent off, you should keep all client responses on file before enacting the switches via the Skandia/SIS website on the first working day of the following month. As an additional service, you will also receive consolidated fund factsheets sent out once a month allowing all fund factsheets for any portfolio to be printed from a single document saving considerable time. These files can be saved to be printed as required and inserted into your Pension Performance Review client reports if required.

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How do you make your recommendations?

Our approach is based on Modern Portfolio Theory meaning that we believe that the effective diversification of a portfolio is the most important factor in determining long-term performance. The asset allocation of our portfolios has been revised and updated by investment professionals to the current models you see today. Within this framework, we aim to choose the best funds and fund managers to optimise the risk/reward trade off for each portfolio.

We do not believe that market timing can be shown to be effective and certainly do not think this is possible on an advisory investment service such as the Pension Performance Review. Saying this, there will be an effective element of market timing conducted by some fund managers within the portfolios as they take a view on market conditions on an ongoing basis.

Investment decisions are always subjective, no matter which criteria are used. Even if rigid filters are put in place, the choice of filters and the order these are applied in is a subjective matter. We are not aware of any set of procedures or criteria which have consistently proved to be effective and so a significant degree of judgement must be exercised when making recommendations.

Our approach relies on looking at a number of key criteria but not applying filters. We try to take a holistic view of the criteria assessed and would not exclude a fund which fails a single criteria when it may be the best fund in all other areas.

The key aspects we consider are:

• Citywire ratings (quantitative)
• OBSR ratings (qualitative)
• Long term fund performance
• Consistency of long term fund performance
• Fund risk / volatility
• Fund size
• Value / growth bias
• Capitalisation size bias
• Industry holdings
• Underlying stock holdings

Our review process aims to take account of each of these factors. We also believe that an effective portfolio will be as diversified as possible which means choosing funds which compliment each other within a particular sector. This means that we may not choose the ‘best’ two funds on the criteria above within a given sector if we believe they are too similar and therefore provide little diversification.

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Who makes the recommendations?

Paul Cadde, MD of Adviser Breakthrough Investment Solutions and a qualified financial adviser makes all investment recommendations. He is assisted in terms of research and analysis by Derek Pegg, who holds the Investment Management Certificate and focuses on pension transfers and investment research.

Does using this service mean I am no longer responsible for the investment recommendations given to my client?

No. You remain entirely responsible for all investment recommendations given to your clients. It is your responsibility to check that the recommendations made are suitable for your clients and you must decide if you wish to act on them. This is not a discretionary portfolio management service, but an information provision service.

Does the Portfolio Update Bulletin Service satisfy my compliance?

We believe that the information provided to you in terms of quality, depth and regularity will more than satisfy your compliance requirements for the investment side of the Pension Performance Review. However, you remain responsible for all compliance matters and should ensure this meets your specific requirements.

Can I use your historic portfolio figures?

Your Pension Performance Review Process software will come pre-populated with the current portfolios and all historic figures back to January 2004 for the Skandia portfolios (and from June 2009 for the SIS portfolios). If you wish to use the Portfolio Update Bulletin Service, you are permitted to use all historic figures and these will be shown on your Portfolio Update Bulletins.

I don’t wish to subscribe. Can you just tell me about any changes that you make to your portfolios and I’ll do the rest?

Unfortunately we are no longer able to support non-subscribers to the Portfolio Update Bulletin Service by way of ad-hoc investment updates or other help unrelated to the general running of the Pension Performance Review Process software. Information on updates, portfolio performance figures, fund switches, etc. cannot be given other than through the Portfolio Update Bulletin Service.

What if I don’t agree with the fund recommendations made?

It is up to each subscriber whether they follow the investment recommendations made. If you do not agree to the recommendations, you should not use the service and should continue with your own recommendations. You are also reminded that investing is often very subjective and there are no ‘right’ ways to choose investment funds. Although full justification will be given for all recommendations made, there may be instances where you wish to question decisions and suggest alternatives. Unfortunately, we are not able to field questions on the Portfolio Update Bulletin Service relating to specific fund recommendations.

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What if I would like to suggest funds to be used?

If you would like to suggest a fund for inclusion within the Portfolio Update Bulletin Service recommendations, please send email us using our Web Contact Form. Please note that although we may then decide to include this fund, we cannot enter into correspondence about our decision if we decide not to.

What has the performance of the portfolios been like so far?

Below is a table which shows the discrete returns for each completed year so far against the benchmarks. These figures are based on the Portfolio Update Bulletin Service Skandia portfolios:

Below is a table which shows the discrete returns for each completed year so far against the benchmarks. These figures are based on the Portfolio Update Bulletin Service SIS portfolios:

All figures bid-to-bid over the periods shown. Small rounding errors may occur.

What is the asset allocation of your model portfolios?

The asset allocation of our five model portfolios has been refined over the years from a basic asset allocation model devised in 2003. All portfolios are broadly diversified. The current asset allocation of each of the portfolios is shown below:

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What is one day post pricing (Skandia only)?

As the Skandia pension funds are mirrors of underlying unit trusts, all pricing data from their pension funds is delayed by one day vis-à-vis the corresponding unit trust. This means that there is a one day lag in all data received. This has implications as benchmark data is not lagged, therefore a large single day swing at the start or end of the month can cause data to be skewed, although over time, the significance of these lags is degraded and is not significant over longer time periods.

What do I do with clients that join mid-way through a review period?

It is unlikely that new clients will join just as a new quarterly review period begins. Where clients join during the quarter, we would suggest sending a Portfolio Update Bulletin to the client in the usual way at the end of the quarter, but adding a note to say that as they have not been invested for the entire period, the performance enjoyed will not be wholly as stated. Attaching the client’s valuation statement will still provide the client with an idea of performance since the policy was set up.

What do I do if clients do not want to follow my recommendations or do not respond when I send the Portfolio Update Bulletin to them?

The Pension Performance Review is an advisory service so it is important that you acquire client authorisation before enacting any switches or rebalances. Any client that has not responded after a given time, should be re-contacted to ensure they have received your correspondence and be prompted to accept or decline your recommendations. Any client that is late (beyond the proposed switch date) in responding, should be unlinked from your model portfolios via the Skandia/SIS website immediately before making your portfolio amendments. If you receive authorisation after the switch date, you should re-link the client and enact the switches outlined as soon as possible. You may want to make a note of any late responders to add a note to the following quarter’s email that due to the late response, their growth may be different from that highlighted in the Portfolio Update Bulletin.

Any client who declines the investment recommendations outlined should also be unlinked from their model portfolio, keeping their investments static. We would suggest still sending the following quarter’s Portfolio Update Bulletin, but with a clear note that, following the client’s instructions, the recommendations were not acted upon and so the information is a guide only and asking if they want to be re-linked. Remember that they will still receive a valuation statement so have still got a means of assessing the policy performance.

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What does the Portfolio Update Bulletin Service Cost?

The cost for the one Portfolio Update Bulletin Service (whether Skandia or SIS) is an initial payment of £250+VAT to register and receive your Start-Up Pack. There is a monthly fee of £155+VAT payable via standing order for each month you use the service.

If you require both the Skandia and SIS Portfolio Update Bulletin Services, the cost for the second service is an additional initial payment of £125+VAT to register and receive your Start-Up Pack. There is an additional monthly fee of £50+VAT payable via standing order for each month you use the service.

Is there a minimum sign up period?

The minimum sign up period is 6 months. A notice period of 3 months is required to terminate the service.

How can I get further information on this?

If you still require further information or have further questions on the Portfolio Update Bulletin Service, please use our Web Contact Form or call 023 8089 2333.

How do I go about signing up?

Please call 023 8089 2333 or use our Web Contact Form to subscribe to the Portfolio Update Bulletin Service. You must be an active user of the Pension Performance Review Process software to subscribe to the Portfolio Update Bulletin Service.

 The Next Step: The Pension Performance Key : The Key Concepts Brochure.