Creating collective funds for your centralised investment process

Successful financial advice and wealth management businesses will have their own centralised investment proposition (CIP) and these can take many different forms, each with their own merits.

When such firms achieve significant scale in terms of clients, assets under management or advice and advisory staff, the next logical step in their development is often to establish a collective fund range. This is because there can be considerable benefits for their clients and their business if the CIP is delivered via their own collective funds.

Brompton’s experienced management team, which has been involved in the creation and management of more than 100 collective investment funds over three decades, is well suited to helping you set up and manage your own fund range, mirroring, as far as possible, your existing CIP and risk-profiling approach to minimise change. If you do not have a CIP, Brompton’s skilled team can help you design and manage a new bespoke investment offering for your clients.

While an advisory business can set up its own collective fund range with all the associated administrative infrastructure, it is generally more cost-effective to use the services of third-parties alongside an authorised corporate director (ACD) to oversee fund operations.

Brompton’s team can provide you with a complete “design, build and manage” service to help you create your own investment funds, starting with an initial review, then proceeding through ACD selection and applying for regulatory permissions to setting up appropriate investment governance structures and management oversight systems.

The main benefits for your clients of investing via a tax-efficient collective fund include:

• an investment service tailored to their needs, with the potential for reduced costs and improved post-tax returns;
• significant savings resulting from the fact that costs such as investment management fees are paid out of pre-tax income within the fund;
• no capital gains tax on transactions within the fund; and
• no VAT, currently 20%, on management fees unlike in certain model portfolios.

The main benefits for your business include:

• the ability to offer an easily-scalable investment proposition, offering improved operational effectiveness;
• a reduction in administrative friction through simplifying the switching process between strategies and investment management, offering improved operational efficiency;
• a dedicated investment management function;
• a dedicated function for investment support and investment reporting for clients;
• the potential for improved revenue to finance reinvestment in technology and systems; and
• the potential to enhance the capital value of your business through improved profitability.

Advisory and wealth management firms thinking of establishing their own investment funds should recognise the complexities involved. Operating collective funds involves additional costs and additional workloads for advisory staff, increased regulatory requirements and risk and the introduction of the oversight and controls required by an ACD. Establishing the right structure and proposition is, therefore, critical in obtaining the maximum benefits for your clients and your business. Brompton is well placed as your investment partner to address such complexities.