Custom Portfolio Construction Service
For professional use only.
How do you know you are using the right tool for the job?
This service has been created specifically for Irish Financial Advisers to offer over 45,000 combinations of taxable investment portfolios which are designed to capture the following potential benefits for their clients:
- The tax treatment of securities, as distinct from investment funds in Ireland, giving the equity component Income Tax and Capital Gains tax treatment rather than Exit Tax.
- A composite portfolio of low-cost, globally diversified bond funds designed to provide stability and allow advisers to mix equities and fixed interest in exact proportions to meet the need, willingness and capacity for risk of their client.
- A composite portfolio of securities designed to replicate a market capitalisation weighted stock portfolio and provide beta or market returns
- A composite portfolio of smaller companies and value stocks designed to capture the higher expected returns from a small value stock portfolio
- The ability to blend these three portfolios in any desired proportion to meet the exact requirements of a particular client with over 45,000 combinations of portfolios.
- A "buy and hold" portfolio in order to minimise ongoing transactions and taxable events
This advice process is intended to help Irish Financial advisers to offer advice on taxable accounts and to generate a portfolio of securities (taxable to income tax and capital gains tax) and to be able to bespoke the portfolio by tilting away from a market capitalisation portfolio towards a portfolio of smaller and value companies.
This process is intended to compliment not replace your existing fact-finding processes and obligations under the Consumer Protection Code and advisers must issue their own Statement of Suitability.
The process is intended to assist advisers to create more customised portfolios for their clients than the off-the-shelf multi-asset portfolios.
The advice process has been designed specifically for taxable accounts held with Conexim Advisors Ltd and is not suitable for any other investment platform.
STEP 1. Identify your client's tax status
Understanding the taxation of investments in Ireland a guide for Financial Advisers
- Investors in these portfolios must self-assess for tax purposes. And all investors must complete and return their tax return (Form 11) by 31 October in the following tax year. Taxation is the responsibility of the end-investor. The Central Bank of Ireland does not regulate tax advice
- The service is intended for larger portfolios (€250,000+) due to the underlying charges applicable for dealing and execution. For smaller accounts advisers should consider if a Life Assurance contract might be more suitable
- Equally, since these portfolios are not monitored or rebalanced, you may conclude that a Discretionary Investment Management service with non-EU ETFs may be more suitable in which case, see www.portfoliometrix.ie for more details.
STEP 2. Identify your client's willingness to have a portfolio which is different to the "market"
Aim: To identify to what extent your client might be willing to "tilt" their portfolio away from a market capitalisation portfolio and to overweight smaller companies and value stocks in order to generate a higher expected return
60 years of research into capital markets suggests that for those clients willing to accept tracking error, and with long-time horizons, over-weighting a stock portfolio with small and value stocks should create a higher expected return.
Here Robert Merton explains the use of models to seek to imperfectly explain the world of investing.
Why might an investor wish to overweight value vs growth stocks in their portfolio?
In a recent webcast, Dimensional Co-CEO and Chief Investment Officer Gerard O’Reilly spoke on the performance of value stocks relative to growth stocks, addressing the theory and data supporting a value premium.
Step 3 – Complete the form
Aim: To provide a bespoke portfolio which meets BOTH the investor’s attitude to investment risk and their desire to tilt their portfolio to factors of higher expected return.
Please use this form to submit your parameters for your custom portfolio
To recommend investment options to a client you need to take into account both your client's preferences around tilting their portfolio to smaller and value companies and their financial aims and information deduced from your standard fact find and risk profile process. This service is intended to suggest a portfolio to help advisers shortlist relevant options more easily by combining market beta with factor investing using a flexible portfolio construction so that advisers can deliver a more customised solution.
The proposed portfolio can then be used as the basis for further research and due diligence by the adviser in order to assess if the proposed portfolio is suitable for their client.
You should carry out your regular due diligence on the proposed portfolio as with any other recommendation and finalise your advice process as normal. This may involve recommending an alternative product or service.
NOTE: This process works on the assumption that a standard fact find questionnaire has been completed and that you understand your clients investment aims and attitude to risk. It also assumes that you have an idea of possible product solutions and you are conducting research and due diligence into investment options.