Former fund managers jump fence

Tuesday 13th January 2004

Two senior figures in the funds management industry have jumped the fence and established their own asset management/advisory business.

Former BT Funds Management vice president Mike Newton and former Sovereign Investments general manager Wayne Ross have teamed up to form Select Asset Management.

Select aims to differentiate itself by offering a comprehensive, tailored planning service to high net worth individuals. Its closest competitor is probably New Zealand Assets Management.

Besides an investment service, Select provides clients with a detailed financial audit, planning and asset management process for individual investors and charitable trusts.

It is deliberately planning to be a boutique business with a maximum of 300 clients with between $1 million and $5 million each, Ross says.

He also says the company is able to offer "appropriately optimised individual portfolios" to clients in the same way services are offered to large institutional investment clients.

Of interest in Select's company profile is the fact that many of the investments offered to clients are directly held, as opposed to managed funds. Ross says a key reason behind this decision is tax efficiency.

He says it is better for clients to own their investments directly through a bare trustee structure such as the Aegis wrap account.

Also Select takes a firm line on fees and could accurately be described as a fee-based planning operation.

The firm charges an initial planning fee (the planning process for each client takes between 25 and 30 hours) and then an on-going portfolio management fee (set as a percentage of assets under management).

Select doesn't pay referral fees or take commissions. All commissions and brokerage fees are fully rebated to the client.

Ross says Select is highly focussed on making sure clients have a completely transparent view of the cost of investing.

"This is an issue for the industry in general where it is often hard for investors to gain a clear picture of the total costs of investment."

While it appears that Select maybe criticising the industry on products and fees, Ross prefers to view it as showing the "limitations" of the mass-market industry.

Often fund managers and advisory firms have to develop mass-market solutions and, for instance, put investors into one of a number of up to five preset diversified portfolios.

"We believe this approach is flawed as it assumes investors have like objectives." As a result people can end up with returns and risks that do not meet their needs. Select tailors portfolios to "mutually agreed return rates and risk budgets". The firm has a conservative bias, as it believes its clients already have substantial assets and therefore rate wealth protection higher than wealth creation.

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