Investment Process 

Investment Methodology

At M3W Wealth Management, we apply a fully transparent and consistent approach to our investment work, irrespective of the size of the portfolio.

This approach; a process created from first principles,  can be applied across the Firm’s client base, taking into account both New and Legacy Investment Business .

It’s aims are:-

• To apply an appropriate risk based model using Asset Allocation methodology with the core  portfolio models provided by Ibbotson Associates.
• To apply a consistent Investment Fund selection methodology , covering both passive and active funds as deemed appropriate. This utilises both Quantitative and Qualitative analysis provided by Morningstar ( and by extension OBSR).
• To apply a constant “monitor” on the portfolios to give indication of any issues that may need attended to between client reviews. This is provided by Morningstar Adviser Workstation on a 24/7 basis, with e- mail alert.
• To utilise an efficient administration service to support the overall proposition (where both suitable and practicable in terms of Platform).

Where “Legacy” business is involved, a system of “best fit” is applied.

The Approach

Whether you are an experienced or indeed lesser or entirely inexperienced Investor , the process we apply is the same.

This is to firstly establish your tolerance to risk volatility (which exists in ALL asset types) and enables us to understand what concerns and drives you in any investment choices. As we have said, all asset types (classes) will vary over time, whether they be Interest Rates, Property Investments, Fixed Interest Stocks (Government Gilts/Treasuries )or Equities: to name the main classes.

The solutions we propose, range from 100% in cash, through to an “Aggressive” investment style, which as the name suggests, will contain more volatile investment values.

However, we DO NOT simply choose one asset class versus another on the scale. For example comparing Equities with Cash ….

Rather (apart from the 100% cash solution) we will use a mix of asset classes appropriate for that level of risk as the framework for our recommendations to you . Basically, not having “All Your Eggs in One Basket”

It is widely accepted, backed up by significant evidence, that asset allocation – the mix of different asset classes in your portfolio – is the main factor in determining your likely future investment returns.

The resources require to achieve this are quite significant and we have partnered with Ibbotson Associates and Morningstar/OBSR ( leading Worldwide experts ), to conduct this work.

The first part of the process then, involves the use of a questionnaire designed to quiz you over how for example,  you would likely react to the behaviour of your investments, the time scale involved and your reaction to better or worse news than expected , to name but a few. This is in effect a “volatility” guide measured both on past experience and an element of assumption for the future on ……..

The likely level of return and of volatility of each asset class.

Assumptions about the extent to which the different asset classes behave differently over time.

The questionnaire also includes measurements of the past performance of the core portfolios that we use to give you a better “actual” idea of how this has worked in practice.

The result will be to suggest one of the 6 possible outcomes. However, this is far from being the end of the process and it also then necessary to put this result into the context of your planning.

NB As part of our Service and Review process , this is checked annually as circumstances can and do change.

Further Risk assessment and the association with LOSS

Firstly, we need to explain exactly what we mean by loss.

Very few, if any people can afford to entirely lose their savings . However, this money; if not tucked under the bed, will be invested probably in a range of assets from Cash to Equities. The loss however can take on two forms :-

Absolute Loss: where values are crystallised ( money taken out) at a bad time or lost entirely.

Apparent Loss: where values are not crystallised and the investor can afford to wait until values recover.

Absolute Loss

The following are practical types of Absolute loss ….

A deposit taking institution becomes insolvent and funds in excess of any investor protection are lost.

A Company in which shares are held becomes insolvent.

Sovereign Debt or Corporate Debt where the issuer defaults.

There is no way to entirely remove the risk of absolute loss. However, reverting back  to the basic principle of not having all your eggs in one basket we can actively seek to minimise this. Our portfolios therefore spread the risk and we conduct the relevant research accordingly.

Apparent Loss

Asset values will rise and fall by their very nature . However , being in a position to have to realise a value at a low valuation is far from ideal . The way to mitigate this in practice , is to have a guide as to what you need to access for cash and indeed over what timescale. The balance can then be left. This way, you at least do not have to sell your investments to have sufficient access to cash/capital in the short term.

Again, we cannot entirely remove apparent loss yet we can actively seek to minimise it, through appropriate planning and annual review.

It is only then by consideration of all of these factors that we can then reasonably establish your Attitude to Risk.

The Review Process

The purpose behind the review process is a recognition of the general fact that all Advice has a “sell by date”. Whilst we make all efforts at the time to ensure our advice is entirely appropriate when we set up an investment portfolio/strategy , it’s value over time can be eroded as a result of …

Changes to legislation

Changes to Tax Law and allowances

Investment Markets and performance

Changes in your circumstances

Therefore, the Review Process essentially consists of two main elements, namely. The “Initial Review and Discussion” document over the past Year’s results.

The confirmation of the way forward next year, including any changes to be made to either the portfolio or planning objectives.

The aim will be therefore to ensure that moving forward, your financial planning affairs are in order both in terms of your expectations and the financial /legislative conditions prevailing.

What is produced from this, re-visits the original plan, makes an assessment on investment performance and finally takes note of any comments and changes.

The probable outcomes would be as follows;

a)         Little or no change required save for a re balance of the portfolio.

b)         Additional changes to be made to account for changes in risk, tax legislation, fund selection.

c)         A new planning report to account for realistic changes in personal circumstances.

As our investment advice is of an Active process as opposed to Discretionary Management, we will require your consent to make any changes once they have been fully qualified.

Not all plans will require a full review process and the service is always proportionate to the particular need.

The value of investments and income from them can go down. You may not get back the original amount invested.