Spotlight on… Portfolio Management

Could you give us a little background about yourself and how you came to be at Clever?

I’ve spent my entire career in finance. From the age of 18 I was in credit lending with MBNA and I worked my way around the credit lending side of the industry until the subprime banking crisis and financial crash of 2008. You might say that I am a product of the industry.

I worked as a credit analyst in consumer lending, then as a mortgage underwriter for one of the HBOS brands, and then – after the post-crash and bubble – I moved into subprime banking for a short time for people who couldn’t get bank accounts after everything that happened.

Thankfully, I managed to move over to the investment side of the business almost 10 years ago. And that was when I started to study for more qualifications and make a real push to get into this side of the industry. I started as a paraplanner and ended up in a hybrid role, as a paraplanner and IFA at a chartered firm.

I’d like to think that, through my experience, I can relate to some of the trials and tribulations that IFAs go through and help by working with them on solutions.

I first came into Clever to provide [IFA] partner support, and a few months into my one-year contract they asked if I wanted to join permanently instead. So although it was almost by accident, I jumped at the opportunity because I always enjoyed the investment side of financial planning the most. What started out as a fixed-term contract has turned into nearly six years at Clever and really developed and grown for me in terms of my role and being a part of the growth of the business.

What was it like to go from an IFA business that researched and selected funds to Clever where this is done by technology? How did you adapt to this new approach?

It was a really fresh way of doing things because I’ve been exposed to a variety of methodologies in the investment space. I’ve seen passive fund picking and allocation. And I’ve seen active fund picking and allocation done on a panel basis, where a compliance network would give you their ‘best buy’ list, and you would choose from that list. I’ve seen and had experience with a variety of model portfolio propositions prior to joining Clever.

And then obviously at Clever the fund picking element is removed because it’s all quantitative, so it’s a really fresh approach, which removes any human emotion and any excess analysis. I think it’s really ready made, it’s done for you and you just have to have conviction in the approach which can be the hardest part of investing for most people (managing emotions).

For some IFAs it is a leap of faith, but it’s objective and the results show that this is a strong way of doing things. It’s literally a case of the analysis is performed, a recommendation is made, and there is history there to guide you.

Where does that leave you as an investment professional? Do you sometimes feel like you’re a babysitter rather than an active participant?

Well, sometimes people think that when the machine runs the process for you, you can then go off and play golf. But the reality is our switch process takes two weeks out of every month in preparation, testing, processing and implementation. The rest of our time is spent on research on a variety of projects, and process improvements. As an investment professional it gives you more time to spend on portfolio management and construction, which adds huge value, rather than fund picking.

How does that resonate with IFAs who might feel that it undervalues their role in the process?

I think sometimes by doing less of one thing it gives you time to do more of another. It gives you time to focus on things that you always wanted to look at and focus on, but never got around to.

And because this is a far more efficient way of doing things in terms of time, and the investment returns are significant, IFAs can see that it benefits the end investor experience. Performance is just one part of the client experience and I think that the meeting between an IFA and a client can then stretch beyond that and focus on other areas of need or aspiration. And it can give the IFA more time to grow their business.

What is your day-to-day contact with IFAs?

I tend to provide IFAs with support when I’m available and when they need it. It tends to relate to analysis but could also be anything else to do with operating CleverAdviser or CleverMPS.

What sorts of questions are IFAs asking lately?

IFA’s are very interested in analysis. They’re interested in how their portfolios look compared to the peer group or a market index – particularly with all the recent volatility. We entered a bear market and most markets are still recovering, so IFAs want to see how their portfolios compare in terms of drawdown or maximum loss. And we’ve had really good feedback about that.

And we’re able to do analysis quickly too. As a business we are very lean because our technology gives us systematic efficiencies and that also means that we are competitively priced in terms of our offerings.

How important is your relationship with the development team?

The development team is absolutely vital to what we do, and the fact that the development team is growing at the pace it is – not only in terms of head count but also in terms of allocated resource – helps to drive home the message that what we do is heavily dependent on technology. It drives our recommendations and decisions. So I liaise with the development team on a daily basis and sit in between the Clever process and 8AM Global. I can help translate any queries or ideas 8AM has into actionable content, with the help of our development team.

Can you explain 8AM’s role?

I spend time with 8AM on the investment committee analysing what we do and translating that into how it relates to the end investor, who are at the heart of everything we do. 8AM helps us to transact our thoughts and recommendations into an offering which helps us then to reach the end investor.

Is that different from what most IFAs experience from an asset manager or a DFM?

I think our results are definitely different, as is our approach, and that all leads to different outcomes. We literally turn the traditional investing approach on its head and look at things through a different lens. I always come back to this idea that we were built by an IFA for IFAs, so the business inherently understands that relationship between the IFA and their client.

Our approach to delivering the service is different too, because it’s powered by technology. For investors it’s really important to have a regular touch point with their IFA and that’s what our switch process does for them every month. The system sends an email to say there has been a fund recommendation, or there hasn’t been a fund recommendation, and everything is fine to continue as it is. So I think that we are very investor focused in a very important way.

What have been some of the most important changes you’ve seen during your time at Clever?

One major change I’ve seen across the board is a huge number of efficiencies powered by greater use of technology and greater computing power. That means our switch process is more efficient now than ever, and our analysis is also more efficient and scalable which means we can serve more IFAs and their clients than ever before.

Also, because of our selection criteria and the absence of human bias, the CleverEngine tends to consider funds that wouldn’t necessarily be on the radar of other MPS providers or investment providers, as well as funds that are slightly smaller than would be recommended elsewhere. So we will allow younger, newer managers an opportunity based on results.

For example, we started recommending ‘MI Chelverton UK Equity Growth’ on its 3rd birthday, when it was £100m in size, because it met all of our criteria. Today the fund manages more than £600m and has been a stellar performer.

It’s worth noting that we don’t have any bias towards the larger well-known funds, there’s no brand bias and the system is agnostic to active or passive products. If the fund fits our criteria, and the results are good, then it will be recommended.