A storyline on the importance of saving for retirement could be making its way onto a popular soap opera – that is if Andy Davies and James Klempster of London-based Momentum Global Investment Management get their way.
The frugal mindset typically shared by baby-boomers has been somewhat eroded and replaced by a ‘carpe diem’ mentality, characterised by a greater dependence on loans and credit cards, according to portfolio manager Mr Klempster, who joined Momentum’s London operation in October 2009.
“We are sleepwalking into a pension crisis,” he said.
“We have vast swathes of the UK population who have never even dreamt of taking financial advice but they are totally unhooked to their own pensions. A lot of people are not saving for retirement and are instead maxing out on their credit cards. This is all going to come home to roost one day.
“I think there needs to be a story line in EastEnders to highlight the issue. There has to be mainstream coverage of this.”
Mr Davies, head of UK retail sales at the asset management firm, cited the death of insurers’ door-to-door salesforces, such as the fabled ‘Man from the Pru’, as a travesty when it comes to instilling a savings culture.
He said: “For me, the money that was invested in financial products which were sold by these door-to-door salespeople would have probably gone on beer and fags. The reality is that the whole discipline of saving has been lost because the regulator basically took out a whole chunk from the UK adviser market. The 1986 Financial Service Act made it harder to be an adviser and made it easy to sue big firms.”
The dynamic duo started working together in June this year when Mr Davies joined the company, having previously worked as head of business development at Sanlam.
Since his appointment, the investment management firm hired Richard Adams, who joined from Fidelity FundsNetwork and ex-regional business director at MetLife Andy Pook as business development managers, to bolster sales to the adviser market.
Mr Davies said: “The business I have joined has got some good foundations but we do not really know the adviser market, so we took the opportunity to hire two experienced and dynamic sales guys who understand that market and the challenges that advisers face.”
One of these challenges centres on advisers’ ability to demonstrate to clients the true value of their service, according to Mr Davies.
Mr Klempster agrees.
He added: “People worry about a 10bps fee but if you save someone 30 per cent by getting their generational tax planning in order, the fee for the service pales in comparison.”
Another sticking point when it comes to investment is risk management.
The asset management industry is notorious for providing sellable solutions for financial advisers, instead designing products that truly meet the needs of the end investor, Mr Davies said.
He added that the FCA’s guidance on assessing risk and the suitability of investments has put too much emphasis on risk management at the detriment of returns.
“If you start by controlling risk, the return is a by-product. Are there many, if any clients, who want accidental returns?
“We approach investments by asking ourselves what the client really wants. They want a reasonable rate of return and a reasonable level of risk. If there is any flexibility it should be around risk and not around return. I think the regulator is hugely to blame because it has scared the IFA community that it has got to start with a risk conversation.”
Momentum’s solution comes in the shape of its Factor Series funds (funds 3, 4 and 6) launched in November 2012. The funds, managed by Mr Klempster, aim to achieve medium to long-term capital growth, adopt the same process and have an annual management fee of 0.5 per cent.
The funds target a risk rating as determined by Distribution Technology. Factor 3 is the most cautious of the funds, while Factor 4 and Factor 6 are classified as lowest medium and low medium risk respectively.
Mr Klempster said: “The reason why we came up with the factor funds is because there are three things you have to think about when you are saving for retirement: what is your time horizon, how much risk are you willing to take and what return you need.”
The trio of funds has not emerged unscathed amid a period of heightened market volatility.
According to FE Analytics data, the funds recorded steady growth in returns over the first four months of the year - peaking in mid April. However, the period between 19 August and 30 September this year saw the returns generated by the Factor 3 and Factor 4 funds plummet by 2.39 per cent and 3.58 per cent respectively.
Similarly, the Factor 6 fund endured a 4.4 per cent drop in returns over the same time period.
Mr Klempster said: “We are not immune to market volatility. We got dragged down by it. We have done our best to protect capital where we can, but we are reaching for a certain level of return so we have to accept a degree of market risk. We are on the way back up now.”
Myron Jobson is a features writer at Financial Adviser
ANDY DAVIES’s CAREER LADDER
June 2015 – Present
Head of UK retail, Momentum Global Investment Management
2013-2015
Head of business development, Sanlam Wealth
2009 – 2012
Sales director, Skandia
2005-2009
UK regional director, Skandia
2000 – 2005
Regional director – Manchester, Skandia
1993-2000
Sales consultant –North Wales and Staffordshire, Skandia
1988-1993
Sales consultant, Clerical Medical Investment Group
1984-1988
Clerk/mortgage adviser, Halifax Building Society
JAMES KLEMPSTER’s CAREER LADDER
October 2009-Present
Portfolio manager, Momentum Global Investment Management, London
October 2008-October 2009
Senior analyst, Momentum Global Investment Management, South Africa
April 2007-October 2008
Portfolio manager, Momentum Global Investment Management, London
2005-2007
Portfolio manager, Avebury Asset Management
2004-2005
Assistant fund manager, NW Brown Group Ltd
