London-based John Lamb Financial Planning has outsourced investment research and management for many years, mostly through advisory portfolios. However, in May 2016, it decided to find a manager that could offer discretionary model portfolios managed to the advice firm’s own mandates.
Head of investments Crispin Homer said: ‘The benefits of discretionary management are huge, but our expertise is in financial planning. Portfolio management requires a full team, which we did not have the resources nor the expertise for.’
John Lamb selected Purple Strategic Capital to set up its models. ‘We had been using Independent Strategic Research for many years to manage our advisory portfolios. They always provided exactly what we wanted,’ said Homer. ‘It was a natural move to use their discretionary management arm Purple for our discretionary models.’
Purple was heavily involved in helping create the investment brief for the models. It was receptive to John Lamb’s ideas and understood what the team wanted to achieve for clients.
‘We still use a panel of other bespoke discretionary fund manager (DFM) portfolios. But we wanted a DFM we could work closely with day to day to help with our own models,’ he explained. ‘Also, there is no minimum portfolio size, so we can take on children of clients and smaller portfolios from other family members without any issues.’
Room for manoeuvre
Homer said Purple’s flexible investment approach was an important differentiator. ‘We had been concerned by the lack of flexibility in the management of some other DFMs’ portfolios. They were unwilling to make big investment calls or move away from a centralised asset allocation.’
‘Most DFMs have a strong home bias,’ he explained. ‘Many stick to asset classes that have traditionally been used in portfolios to perform certain functions, even if the economic or market indicators show that now is not a good time to invest in these assets.’
In contrast, Homer’s view is that a client can have a long-term attitude to risk, but the firm should be able to de-risk the portfolio for a period without forcing them to change the client’s risk profile.
‘Purple are happy to have no allocation to an asset class or sector if they feel it is not the right time. They are not afraid to go against conventional wisdom and manage our portfolios with a flexible approach and wide boundaries. This means they can make big swings in how much is invested in each area of the portfolio, which we see as a huge benefit.’
Despite everything, Homer acknowledges that the manager has a relatively short track record and is not well known in the market. This means it can be more difficult to explain its credentials to clients.
‘Once the track record on the portfolios grows this will be less of an issue. We are just past the one-year mark and returns have been strong,’ he said.
POINTS OF VIEW
Purple’s portfolio management is well priced compared with other model portfolio services.
It is happy to have no allocation to an asset class or sector if it feels the timing is wrong.
Understanding client needs
Purple was heavily involved in creating John Lamb’s investment brief and was receptive to its ideas.
No bespoke offering
Purple has no interaction with clients, so it is not possible to offer more bespoke management of the models to accommodate small client preferences or tax constraints.
As it is relatively new, Purple does not yet have agreements in place with all the platforms it might like to use.
Record and name
The manager has a relatively short record and is not well known in the market.
Average portfolio size of the adviser's clients: £300,000
Minimum investment limit for clients using the service: None
Number of the adviser's clients using the service: 200