How Wesleyan offers a compelling investment solution for advisers and their clients

In this Q&A, Nick Henshaw, Head of Intermediary Distribution at Wesleyan, the financial services mutual, explains how and why he believes Wesleyan is ideally positioned to support the needs of advisers and their clients. Nick also provides insight into Wesleyan’s With Profits Growth Fund Series A which has recently entered the intermediary market and which he feels is particularly appropriate for investors’ portfolios in today’s inflationary and volatile market conditions.

IFA Magazine: How important is Wesleyan’s mutual status? Do you believe it strengthens the appeal for advisers and their clients?

NH: Mutuality is an integral part of who we are. It’s the backbone of Wesleyan that sets us apart from most other financial services organisations. We have no shareholders, so we can invest more time and money in our business – we are all about delivering for our members, customers, and investors. Being a mutual means that we can keep our focus.

IFA Magazine: How would you describe Wesleyan’s smoothed With Profits proposition for advisers and their clients? Can you give us a brief overview of the main investment criteria which advisers need to know?

NH: We’re delighted that Wesleyan’s With Profits Growth Fund Series A is being used by advisers for their clients’ portfolios and we’re looking forward to building stronger long-term relationships with intermediaries.

The fund is managed in line with its ‘moderate’ risk rating to achieve two key outcomes:

1) Generate positive long-term financial returns for everyone invested

2) Reduce the impact of short-term market volatility on the underlying assets by smoothing the returns investors receive.

Firstly, minimising volatility in investors’ portfolios can help as we know high volatility often alarms clients and can cause them to make poor investment decisions. Secondly, the fund is a diversified multi-asset portfolio with 75% of the fund invested in equities and property (10% commercial property, 65% equities), because the Fund Manager believes these assets are the most likely to achieve healthy long-term returns.

Our financial strength and actuarial smoothing process enable us to even out the performance of these assets, which helps clients to feel more comfortable and confident in the short term – giving them the chance not only to achieve strong returns in the long term but in a way which allows them to sleep at night.

IFA Magazine: In today’s challenging market conditions, why do you believe that a smoothed approach and a With Profits Fund should be on an adviser’s radar for use as part of their clients’ diversified portfolios?

NH: I’d argue that smoothed funds have never been more appropriate and should certainly be on an adviser’s radar given the market uncertainty which exists today. The smoothing mechanism is designed to reduce short-term volatility caused by market uncertainty, which helps clients to stick to their long-term investment goals and financial plans, and not to be spooked by volatile markets – which might have otherwise led them to panic and sell out at the wrong time, thereby crystallising a loss.

One clear benefit of our fund is that it is a diversified multi-asset portfolio. Some advisers may utilise a ‘core and satellite’ approach to running their clients’ portfolios – using Wesleyan as a core and adding other assets alongside to either increase or decrease the risk profile and long-term returns of the portfolio. Either way, we believe the fund has relevance and appeal for advisers to use to help achieve their clients’ investment objectives.

IFA Magazine: There are other With Profits providers in the market which have already established strong relationships with advisers. How would you sum up the Wesleyan difference and why should advisers consider Wesleyan as an investment provider of smoothed investments?

NH: This is indeed a mature market, with other With Profits and smoothed managed fund providers being used.

Wesleyan has put smoothed investments at the heart of what we do for over 100 years as a With Profits provider. Working with advisers and helping their clients is a natural progression for us.

Different providers all have different methods for applying the all-important smoothing mechanism. It is how the process is carried out in the short term that is notable.

We use a different system for smoothing, which we believe provides a smoother, more responsive proposition, built around transparent daily pricing. This means the investor can see an accurate valuation of their fund on any given day. Our system addresses a lot of the frustrations that advisers have historically shown towards the With Profits market and is another key reason why advisers are increasingly considering the use of our fund for their clients.

Wesleyan is unique in that it has the first smoothed managed With Profits proposition to be available via an independent platform (Novia). This provides advisers with a modern and preferred route for administering client assets.

Although the advice part of the process is driven by advisers, we have a UK-wide team of Relationship Managers in place, to support advisers and their teams. Our Relationship Managers are available for face-to-face and virtual meetings providing advisers with a wealth of information, support and training.

IFA Magazine: You mention that the Wesleyan With Profits Growth Fund Series A is available via the Novia platform? Are you likely to add other platform providers in future?

NH: We’re proud that advisers can gain access to the fund (for SIPP and ISA investments) via the Novia platform. Novia has been our platform partner of choice since our launch to the intermediary market, and they have really gone above and beyond to provide us with plenty of help and support when needed.

 As to the future, yes, we believe there could be further opportunities to add other platforms. We’ve specifically designed the smoothing process to work on platforms, which makes our fund a particularly good fit for them.

IFA Magazine: In which ways do advisers use the Wesleyan With Profits Fund as part of an overall diversified investment strategy for clients? Are there particular client scenarios in which it is particularly attractive and proving popular?

NH: Advisers who include our fund in their clients’ portfolios typically either employ a ‘core and satellite’ approach or use the fund alongside other multi-asset funds. However, as it is a diversified portfolio, many will use it as a standalone fund.

This fund is particularly appealing for clients looking for income in retirement due to the reduced volatility and excellent potential for long-term returns. This combination may also work well for clients that are new to investing and as a solution for clients with cash ISA investments who may be looking for a long-term real return.

The fund is also a good fit for nervous clients who don’t like to see the value of their investment fluctuating significantly in line with market movements.

 Lastly, the fund can also be beneficial for clients who are approaching retirement and prefer to minimise the impact of market volatility on their decision to move from the accumulation to decumulation phase.

IFA Magazine: Are advisers and paraplanners able to get third party reports on the fund from an external risk ratings agency to support their due diligence process? If so, which providers can they use?

NH: Yes. We currently work with the independent risk rating agencies Defaqto, Dynamic Planner and Synaptic, as we know that these providers are particularly popular with advisers. Defaqto and Dynamic Planner have assigned us the risk rating 5 and Synaptic has rated the fund ‘balanced’.

IFA Magazine: Why is Wesleyan looking to further its relationships with financial advisers and planners?

NH: At Wesleyan, we are firm believers in the value of sound financial advice and providing the right solutions for clients. For some time we have felt that we can provide increased choice for advisers and their clients in the With Profits/smoothed fund sector. So we specifically designed the smoothing mechanism of our With Profits Growth Fund Series A with platforms in mind, and our initial partnership with Novia has allowed us to offer financial advisers this low volatility, highly diversified investment option to their clients.

As a mutual without shareholders, and in keeping with our core values, we have the ability to fully focus on the needs of our investors. Through daily pricing, smoothing and trading with no unit price adjustments and no MVRs, we provide fair value for investors with a greater level of transparency. We believe that with our proposition, we are enhancing the sector by offering greater choice and flexibility for advisers and their clients.

Whilst working with intermediaries is a new direction for Wesleyan, it is one that we are 100% strategically committed to. We have built a strong distribution team of well-established, highly experienced Relationship Managers to support advisers from all around the UK.

IFA Magazine: Wesleyan Financial Services – part of the Wesleyan group – has its own advice firm, can independent advisers be confident that their clients will not be approached directly?

NH: Yes, they absolutely can. Advisers can have peace of mind of this for a number of reasons. Adherence to GDPR rules is a key one. Clients who invest in our fund remain firmly the adviser’s clients. And the platform is the administrator, not Wesleyan. So, in line with this, at Wesleyan we only receive data relating to the aggregated trades made on a platform, not any individual client information.

In addition, the advice part of Wesleyan’s business – Wesleyan Financial Services – is a separate business entity to Wesleyan Assurance Society, who manage the With Profits Fund. We value the relationship we have with advisers and are totally committed to supporting their needs for the long term.

IFA Magazine: So, does Wesleyan have particular plans for developing its relationships with advisers in future? Is the range of products offered through your intermediary channel likely to increase?

NH: It’s possible that we may offer other versions of the With Profits Fund in the future. However, right now we are very much concentrating on the With Profits Growth Fund Series A. It’s been great to build strong working relationships with advisers so far and we’re looking forward to doing much more of this in future.

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