Rolling out services can be a difficult process but investment management firm Brooks Macdonald sees value in unveiling some of its UK-based offerings out to the international market.
The firm launched its pension decumulation service in the UK in April 2019, after International Adviser reported on its unveiling in March.
The solution is available to those with a minimum of £500,000 ($651,000, €580,000) to invest, and aims to address the conflicting risks that investors face when approaching or beginning to draw an income from their investment portfolios.
The chief executive of Brooks Macdonald International, Andrew Shepherd, told IA: “The decumulation service is definitely an area we can see an opportunity on an international basis. I have worked with Andrew Lewis, who is the guy heading it up in the UK, since he joined Brooks on this subject matter.
“When I worked in the 1990s as an IFA, we used to run investment portfolios based on a decumulation strategy.
“I am a huge advocate of the added value it can bring to a client on their outcomes. I think there is a good place for decumulation in what we do anywhere.”
Demand
“We have seen very little demand for decumulation because no one has talked about it,” Shepherd added.
“In the UK, you will see a raft of products. We haven’t talked to anyone about this in the international market.
“There may be some difference from the UK, which is my initial view on it. There is some tweaking to do. But I have no doubt the demand is there.”
The deputy chief executive of Brooks Macdonald International, Richard Hughes, also told IA: “Pension decumulation is a phenomenon that has grown since the pension freedoms.
“Historically, north of 80% of retirees that went into pension drawdown or into retirement purchased an annuity before the freedoms.
“Now, this is a widespread challenge that because people have freedom to do things instead of purchasing annuities, and with interest rates being low, there is this growing challenge that is being met with products like the decumulation service.
“It isn’t a new phenomenon but it’s a greater challenge in the UK, but it will also be relevant in some international markets.
“We will probably look to roll out the solution more widely. What we have created is completely repeatable.
“There are some nuances that we would have to amend to make it work in the international market but it wouldn’t be monumental changes.”
Responsible investment service
Pension decumulation is not the only UK solution BMI believes it could offer to the international market.
It also sees its responsible investment service as an opportunity further afield.
The service offers both an avoidance-based approach and a strategy which actively seeks to invest in funds that provide solutions to sustainability issues, or that have strong corporate policies and outputs relating to ESG (environmental, social and governance) criteria.
Hughes, who is also head of business development at the group, added: “We are educating clients’ advisers on investment themes.
“Responsible investing is a big topic at the moment. We have always been able to address clients needs to invest more responsibly.
“We have done that with restrictive investing by not investing in areas like tobacco. But responsible investing is about more proactive investing in a positive way, so we have responded to that with the service.
“We have had quite a lot of demand in the UK, but there is certainly a way to replicate it in the international market.
“There has been some questioning around it. It is going to take some time to develop it because the underlying content to complete a portfolio having screened for dealing with some ethical considerations.
“The availability is not as well developed outside of the UK. It is a chicken and egg scenario. Product providers won’t put it together if there is no demand and if there is no demand it won’t happen.
“There is plenty of equity, bond and ETF content out there to populate a portfolio in a responsible way for the higher value client. It is the retail end that we need to use fund content where there is a more limited market at the moment, but it is developing very fast.”
South Africa
In a bid to bolster its offering in the jurisdictions it currently works in, Brooks Macdonald may look towards strategic partnerships as well as product offerings.
Brooks Macdonald International already has a strategic partnership with Dubai-based advisory firm Abacus Financial Consultants.
The alliance gives local clients of Abacus access to Brooks Macdonald’s full range of international investment management services – including its discretionary multi-asset and direct equity and bond strategies.
“We are always talking to firms about strategic partnership,” Hughes said. “We have enjoyed a three-year partnership with Abacus in Dubai and that is going well.
“I would like to see us do something like that in South Africa. We have got really good traction there, and I would like us to do a partnership deal there and possibly in one of the European locations.”
Shepherd added: “Strategic partnerships are a really interesting area. I was involved in setting up the first strategic alliance that Brooks did back in the late noughties.
“The principal of them can apply today, which is essentially that you are building a relationship with a firm, which opens the doors of your business to them.
“If you take the example of Abacus, we allowed them to explore our expertise and capabilities to help them to grow and allow their clients to improve their outcomes.
“This is a powerful statement to make for any business looking to grow.
“We would like to undertake more of these. There is much less desire for these to be publicly stated than ten years ago, but there are firms out there that we would like to work with.
“I will specifically go directly to them. You wouldn’t want to have lots of them close together as it takes away benefits for the adviser.”
Technology
The firm also believes that it can reach out to the advisory community globally through the increasing use of wealthtech.
Hughes added: “The main thing we will look at is the way we communicate. This means looking at the way we update and how we use media to articulate our ideas all the way to dealing with clients.
“There is a big move to financial advisers making use of CRM tools, and rather than the traditional way of evaluating a client through a paper version to a secure email.
“We are now looking at piping the data flow to advisers and to other professionals to provide them with the power to communicate with clients.
“The platforms have an increasing role in this, and we are very active with the platforms at the moment especially internationally to work with the platform providers that are fundamentally tech providers first.
“We will work with them to deliver tech solutions to advisers, and that is more important in places like South Africa and the Middle East, where the distance they cover is greater than an adviser in the UK.
“Access to financial advice is not done regularly face to face as they might not have the capability. This is where we see tech having a greater role especially in the cross-border distance environment.”
