As part of a new series, FE Trusnet will interview members of the FE AFI panel to find out a little about their firm, and the current challenges facing advisers and investors. First up, we speak to Darius McDermott, managing director of Chelsea Financial Services.
How much money do you look after?
"Our business, although we are a non-advisory business, has an active client list of around 40,000 investors."
"Money-wise, we are in charge of around £1bn worth of assets."
What kind of clients do you look after?
"We have a very vast client base, but typically on aggregate there is a common theme among our clients. They tend to be investors who have managed to accumulate a great deal of wealth and are reaching retirement age or have their eye on retiring in the coming years."
"However, as I said earlier, we do have a client base of around 40,000 so we have investors from all walks of life."
What are the most challenging factors in managing money at the moment?
"Well I think that there are two main areas that have been and will be difficult to manage."
"Firstly, the difficulty of managing equity stock markets has been very difficult. This hasn’t just been going on for a couple of years like some people think, but in reality it has been an issue that has been ongoing for the last decade."
"We do have exposure to the bond market and this has increased recently. But we are looking at around 70 per cent equity to 30 per cent bonds, and our highest weighting has had a difficult period, so that has been challenging."
"Then there is the dreaded RDR."
"Again, although we are not an advisory firm, the issues won’t hit us straight away. But there will, undoubtedly, be a fallout in the not too distant future and we will need to address these issues in due course."
What are the biggest dangers to look out for when managing a portfolio?
"I think addressing volatility is a major challenge."
"Certain investors want good returns and will sacrifice stability to get there. However, a lot of our clients would rather get there slower and with lower volatility."
"Some of them seek out the short-term reward, but I think the majority of our clients are level-headed and have a more long-term view and will accept volatility over the short term."
What is the best investment decision you have made during your career?
"I joined in the early 2000s during the peak of the tech bubble, and I think issues like this and adapting to ever-changing market conditions are areas I have been very happy with."
"One of the most significant decisions was our fund platform. We were very early, compared with our competitors, to use technology to help with investment portfolios. We were the first IFAs to highlight the usage of Eswitch, for example."
"We have been using technology like Eswitch to get the right functionality our clients want."
"In terms of the increased usage of technology, I have had a very happy overlap during my tenure as managing director."
And the worst?
"I think it boils down to anything we have recommended where our clients have not made any money or even lost money."
"This can come from either misreading market conditions or from bad fund selection. On aggregate, we have had good fund selection but there has been the odd stinker."
"But I think we have had a very good selection of funds over the years."
"For example, I met with Ian Henderson, who was managing JPM Natural Resources at the time, early on in my career, and as soon as he left my office I personally bought it and then put it publicly on our buy-list and our clients have made a lot of money from it over the years."