Monthly Archives

May 2023

Graphic of a series of cogs reading 'Rules', 'Standards', 'Policies', 'Regulations', and 'Compliance' - Explaining Consumer Duty

Explaining Consumer Duty and how this enforces the benefits of independent advice

By | Financial Planning

Firms have until 31st July 2023 to fully implement the Consumer Duty requirements for new and existing products and services. The Financial Conduct Authority (FCA) introduced the new requirements last year and undoubtedly these are significant pieces of regulation that aim to improve how firms serve their clients.

In recent years, the FCA has considered several provider services and products unfit for purpose because they fail to provide fair value, ongoing support or exploit customer loyalty. To combat this, the FCA’s Consumer Duty aims to create a significant shift in culture and behaviour to ensure all firms offer a higher standard of care for its clients.


Underpinning principles

The underpinning principles of the new regulations set out how the FCA expects firms to act. In essence, a firm must act to deliver good outcomes for retail clients by acting in good faith and supporting them in pursuit of their financial objectives. The FCA wants to see these new principles applied to products and services, price and value, consumer understanding and consumer support. When designing a product or service, providers should also avoid negative barriers and anything that could impact on a consumer experience such as exit penalties or unreasonable terms that may make it difficult for a client to move to an alternative provider in the future.


FAS Consumer Duty analysis

Whilst it may be labour intensive and somewhat consuming at times, we welcome any regulatory change that raises the bar within our industry, which has come a long way over the past 20+ years. Far too often, we still hear and read about poor consumer experiences where clients have perhaps been “sold” a dubious product or service, have been charged an extortionate fee or are continuing to pay for a service they do not receive.

At FAS, good client outcomes are at the core of our everyday operations, and we are confident that the depth of what we do here is way above the industry standard. So, we hope it will come as no surprise to you that having undertaken a fair assessment of the services we provide in line with the new Consumer Duty regulations, incorporating the Concepts Discretionary Managed Portfolio Service, it has been comfortably demonstrated that FAS does indeed provide fair value and good outcomes for its clients. Furthermore, we will be reviewing the services we provide each year to ensure that this continues.

As part of our Due Diligence, we will also be monitoring the platforms and product providers we recommend to our clients to make sure they too meet all the new Consumer Duty requirements for clients.


Independent v Restricted

As many of you will know, there are two types of financial adviser, an independent adviser and a restricted adviser. At FAS, we choose to be completely independent so that we can research and recommend financial products spanning the whole of the market. In doing so, our advice is unbiased and unrestricted which contrasts with a restricted firm where advisers are limited to certain products from certain providers. In some cases, restricted advisers can only recommend products from a single company, which in our opinion is not providing a comprehensive service to clients or good value.

We are very proud of our independence, and the ability to recommend the most appropriate product or service from across the marketplace helps us to achieve our aim of providing the best advice to clients. By being independent, we can also aim to provide good value for money, by being able to access potentially more cost-effective options from across the industry.


Client awareness of restrictions?

Consumer Duty throws a shadow over a restricted advice service, and we wonder how such firms are faring with this regulatory review. Consumer Duty requires firms to demonstrate that they are providing good outcomes for clients, and value for money. There is a greater emphasis on the need for clients to understand the precise nature of the service they are receiving so we would be interested to know what percentage of restricted advice clients truly understand the restrictions they are faced with and the impact these can have.

By not being able to select funds from across the marketplace, this can dampen investment returns from the chosen investment funds, as a single fund house or manager is unlikely to be “best of breed” in all areas of the market. We have undertaken own our analysis and research of fund performance of the in-house funds offered by firms offering a one-stop shop and discovered that in many cases fund performance over the long term can be disappointing. Also, despite the restricted nature of the advice, clients opting for a restricted service may not receive good value for money, as fund solutions and management fees may be higher than those charged by firms that are independent.

We believe Consumer Duty gives independent firms such as FAS a distinct advantage and as our day-to-day operations focus on providing a responsive, independent advice service, we feel confident that our business easily meets the requirements of the new regulations.

If you have any questions regarding our internal review or any other matter relating to your financial arrangements, please do get in touch here.

'Diversification' typed on paper surrounded by wooden cogs. paperclips, pegs and pins - the importance of diversification

Portfolio construction – the importance of diversification

By | Investments

Perhaps the single most important factor that determines the success of a chosen investment strategy is how risk and reward are balanced. Naturally, investors are always keen to maximise returns where possible, but it is important to bear in mind the level of risk that is being taken in trying to achieve an investment goal.

One of the key building blocks of any successful portfolio strategy, and an effective way of reducing portfolio risk, is to add different types of investments and blend them together, so that a diversified portfolio is created. Holding a diversified portfolio can help reduce risk, as different asset types tend to behave differently. This can help smooth returns in periods when markets are volatile, and avoid being over-exposed to one particular investment.

Diversification can be achieved in a number of ways, and a good starting point is to consider the allocation given to each different type of asset in the portfolio. Whilst many people will hold shares in their portfolio, adding government bonds, property, alternative investments and cash to the mix will help diversify returns, as each of these asset classes reacts differently to changes in the economic landscape.


Look further afield for returns

Whilst investing in different asset classes can lay the foundations, further diversification can be achieved by broadening your horizons to consider global investments. We see far too many portfolios managed by other fund managers, or by individuals who self-select investments, that are heavily weighted towards UK shares. Whilst the FTSE100 index of leading shares can, perhaps, be viewed as a global index (as company profits are often derived globally) many mid-sized and smaller UK companies have a domestic focus, and therefore the fortunes of the UK economy will have a direct bearing on performance. Holding a UK focused portfolio, for example, may well have led to consistent underperformance when compared to global markets between 2016 and 2021. Only holding UK assets can also mean that is it difficult to gain exposure to specific sectors, such as Technology.

This concentrated risk can be mitigated by investing in other areas of the World. Allocating funds to other areas, such as the US, Europe, Far East and Emerging Markets can seek out investment opportunities in different geographic regions. This can reduce risk, as it is often the case that the economic prospects of developed and emerging nations can look very different at a particular point in time.


Stock specific risk

Holding individual shares also introduces additional risk, as specific factors affecting the company or companies in which you hold shares could have a significant impact on investment returns. This can effectively be reduced by investing in a collective investment fund, such as a Unit Trust. These investments hold a range of positions, so instead of investing in one, or a handful of companies, you gain exposure to a much wider range of companies across different sectors of the economy. This won’t prevent the portfolio rising and falling in value, but does limit the potential negative impact of poor performance of an individual stock on the overall performance of the portfolio.

Concentrating investments in one particular sector of the economy can also introduce risk, as difficulties faced by one company can often spread across similar companies. Take general retailers for example. If high street spending falls, due to economic contraction, then this is likely to affect most major retail stocks. In this scenario, holding a portfolio of retail shares is not going to provide adequate diversification, as the price of all shares in the sector may be adversely affected at the same time.


Review and rebalance

Whilst portfolio diversification is a proven investment theory, it does not remove the need to consider the investment strategy adopted regularly, to ensure that the investments held continue to meet your needs and objectives, and remain appropriate given the prevailing economic and market conditions. This was more true than ever last year, when the mix of high inflation and rapid interest rate hikes caused risk assets to move in a similar direction at the same time. This underlines the importance of tailoring the portfolio approach to fit the prevailing and expected conditions.

Keeping a portfolio under regular review is just as crucial as the initial construction phase and this is where an ongoing review service offered by an independent financial planner can add value, by making changes where appropriate to position the portfolio for the expected conditions. At FAS, our ongoing advice service offers a comprehensive and robust financial review at regular intervals, and part of this review looks to ensure that adequate diversification is maintained. Part of this review may lead to a rebalancing exercise, where portfolio allocations are adjusted so that the desired asset allocation is restored.

If you hold an investment portfolio that has not been regularly reviewed or wish to invest capital using an actively managed and conviction-based investment approach, then speak to one of our experienced advisers. We can provide an independent assessment of existing investment portfolios and offer tailored investment solutions on an advisory and discretionary basis.

If you would like to discuss the above in more detail, please speak to one of our Financial Planners here.


Tax treatment varies according to individual circumstances and is subject to change. The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested, even taking into account the tax benefits. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers. Stocks and Shares ISAs invest in corporate bonds, stocks and shares and other assets that fluctuate in value. The Financial Conduct Authority does not regulate tax advice.

technology stocks

Why tech should remain part of your portfolio

By | Investments

Technology features in almost every aspect of our daily lives, and prime examples of areas where technology has rapidly advanced over recent years includes cloud computing, e-commerce and electric vehicles. Advances in technology can bring exciting prospects for growth, and this is one of the key reasons why holding exposure to technology companies is an attractive proposition for growth-minded investors.


Increasing influence

It is impossible to ignore the influence of technology stocks on the prospects for global markets. Tech companies make up 22% of the MSCI World Index, which is an index of the largest companies across 23 developed World markets. Apple and Microsoft are the two largest quoted companies in the World, as measured by market capitalisation, with a combined market valuation of $4.8 trillion USD. Also within the top 10 companies measured by market capitalisation are Alphabet (the parent company of Google), Nvidia, Tesla and Meta (formerly Facebook).


Too big to ignore?

Major global tech giants such as Apple, Microsoft and Amazon are now a feature of our everyday lives. Anyone holding an investment portfolio, or pension fund invested in Equities, is likely to hold these global giants, and any global index tracking fund will have significant exposure. Given the sheer size of the likes of Apple and Microsoft, the prospects for global stock markets are, therefore, closely linked to the performance of a handful of tech companies. One could, therefore, argue that these stocks are simply too big to ignore.


Growth expectations

Investing in technology stocks can provide exciting prospects for growth, as they can often disrupt markets with innovation that changes the landscape. This is very different from more traditional industries, where growth can often be linked to wider performance of the economy.

Tech stocks have the potential for faster growth, as they tend to have higher margins on the products or services they offer. Valuations of tech companies can therefore be expensive compared to other sectors of the economy, as investors expect to see strong growth in the future. As a result, the valuations placed on high growth tech stocks often leave little room for disappointment.

There are examples of highly rated tech start-ups quoted on exchanges that are yet to make a profit, with the lofty valuation based on the hope of explosive future earnings growth, which may or may not occur. This is why some areas of the tech sector can carry much greater levels of investment risk than others. Technology stocks can also suffer from being in vogue briefly and then find progress much harder to maintain. A recent example of this is Peloton, the fitness equipment manufacturer, whose shares trade at a fraction of the price seen during 2020.


The prospects for technology

The Covid-19 pandemic led to a rapid take-up of tech, and the strong performance seen by leading tech names drove the wider market to recovery from the low point reached during the first pandemic lockdown.

2022 was, however, a period when markets’ focus shifted away from technology, and value stocks and companies whose fortunes benefit from interest rate hikes outperformed. One of the reasons for this is that tech companies often rely on borrowing to fuel their growth and as interest rates rise, it is more expensive for these companies to service their debt. As markets expect interest rates to peak later this year, and possibly fall during 2024, attention has shifted again to the tech sector, which has seen strong gains so far this year.


The need for diversification

Diversification is a key component of any successful investment strategy. Whilst it is easy to be attracted to the growth potential that technology offers, it is vital to remember that high growth investments tend to be volatile – in other words, they can amplify the ups and downs of investment markets over time.

Whilst many tech companies are priced based on explosive growth in the future, a good proportion of tech companies have gone through their rapid expansion phase, and now offer something for the value investor. This is why holding a spread of companies in a collective investment, such as a Unit Trust, can help reduce risk.

It is also important to balance exposure to technology with other sectors of the economy, such as financial stocks, energy, utilities and industrials. By allocating your portfolio across different sectors, you can look to reduce the risk of one sector underperforming, and therefore harming the portfolio value, as not all sectors move in the same direction or speed at the same time. Adding balance by investing in other asset classes, such as Bonds, Property and Cash can also further reduce risk, as their returns don’t tend to be linked to stock market returns.

It’s always best to speak to an independent financial adviser before taking any action to change an investment strategy. Our experienced advisers can evaluate an existing investment portfolio and provide expert advice on the best way to get exposure to the tech sector.

If you would like to discuss the above in more detail, please speak to one of our Financial Planners here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.

financial advice

The power of advice

By | Financial Planning

When we consider what the future may look like, many would place financial security high on their list of priorities. Once financial objectives have been set, it takes forward thinking and planning to achieve those goals. Whilst it is possible to create a plan yourself, using a financial planner can provide expert advice and reassurance, help identify areas that you may not have considered and save time too. In this article, we look at some of the key ways that financial planning can help achieve investment goals.


Setting the objectives

When people first engage with a financial planner, one of the key areas to agree upon are the financial objectives that need to be considered. Identifying a priority order is an important step to take, to obtain a clear view of the most important areas to tackle first. Objectives can change over time, and at different stages of our lives, our priorities will evolve. For example, a young family looking to purchase their first home may well be focused on obtaining a mortgage or protecting their family in the event of death or ill-health. Whilst long-term saving and pension planning would naturally be desirable at this time too, affordability may well dictate that these areas take a lower priority for the time being. Other life events that can lead to a significant shift in financial priorities are reaching retirement age, getting married or facing divorce.


Identifying opportunities

Financial planning is a personal process. Everyone has a different set of circumstances, goals and attitude to risk, and it is therefore not possible to create a financial planning template that best suits every possible situation. Engaging with a qualified financial planner can introduce solutions and opportunities that may not immediately be apparent. These solutions and ideas can vary from ways at which income tax liabilities can be reduced, to investment advice to reduce risk and diversify an existing investment portfolio. Taking a holistic view can also identify gaps in a financial plan, such as the need to arrange additional protection, to establishing a plan to fund school fees or university costs in the future.


Regular review and planning

None of us know what the future holds and even the best laid plans may need to adapt to a change in circumstances. Advice is perishable, and a particular course of action may need to be altered as circumstances change. This is why reviewing your finances on a regular basis is so important, as it provides the opportunity to consider whether you’re on track to meet your goals, and understand how existing plans and arrangements may need to adapt.

Holding a formal financial review at least once a year can also be the ideal time to look at annual planning opportunities, such as using the Individual Savings Account (ISA) allowance, making additional pension contributions, or selling assets to use your Capital Gains Tax allowance. It can also make sure that your finances are not affected by any changes in legislation that have occurred since the previous review.


Reassurance in difficult market conditions

Investment is a long-term process and markets will go through bouts of volatility from time to time. Behavioural finance studies show that investors can make rash decisions to sell investments when market conditions are difficult, which may not be the correct course of action to take. It is at this point that the true value of financial planning advice can be found. Speaking to an adviser can provide reassurance and a calm voice through market turmoil, helping you focus on the longer term and taking an impartial view of your overall financial position. A good adviser can also suggest changes to asset allocation if appropriate and highlight opportunities.


Saving time

Whilst some people are happy to create and manage their own financial plans, many would prefer to work with a financial planner to help achieve their investment goals. Life is busy and it can be difficult to find the time to properly review and consider existing financial arrangements. Engaging a financial planner can lighten the burden and provide peace of mind that a professional is keeping abreast of financial markets and reviewing the investment plan.


The value of advice

Holistic financial planning can add significant value in terms of guidance, planning and reassurance. Over the longer term, it could also boost returns. A study carried out by Vanguard in 2020 found that working with an adviser can help increase investment returns over time, through added value achieved by behavioural coaching, rebalancing of portfolios and use of annual tax exemptions. Vanguard estimate that these factors could potentially add around 3% per annum in additional returns. Naturally, there are some caveats, in that investment market performance can vary from year to year, and the monetary benefit of using an adviser will vary accordingly. The study is, however, an interesting attempt to quantify the benefits of engaging with a financial planner.


Engage the right adviser

Using a financial adviser to create a plan, and undertake regular reviews, can provide many benefits, from tax planning to guidance and reassurance. Using a Chartered firm brings further comfort that the advisers are highly qualified, and the business will aim to deliver the highest standards of professionalism.

Contact us here to start a conversation with one of our experienced financial planners.


Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.