Some advisers were earlier entrants into the passive funds world than others. Andrew Whiteley, director at Provisio Wealth Management, was one of them. Whiteley started using commission free and low cost solutions well ahead of his peers and the implementation of RDR. The IFA of 27 years had had enough of active management and outsourcing in 2008, and decided to embrace his 'cynical side' and switch to passive funds.
He told ETF Report UK: "[…] when it came to selecting the funds to populate the portfolios, it just made a lot of sense for us to buy the asset classes we wanted rather than to shoehorn in a fund manager."
But he's not all about ETFs and will use the odd active fund if he views it as a sensible choice, like in fixed income, where he tends to invest in the Kames High Yield Bond fund.
Whiteley's firm has a 1% upfront charge plus an ongoing annual charge of 1%, saving around 75 basis points on portfolio management costs compared to his active fund days, despite having increased his charge to clients. He also creates his own bands of risk in which he monitors his model portfolios, instead of outsourcing this task to another firm.
Not only does he run an advisory service, he also runs Assetfirst, a discretionary wealth manager service for other IFAs, which saw 25% asset growth last year to £320 million. The platform friendly portfolios and asset allocation are similar to Provisio, and enable a wider span of his peers to engage with a low cost and efficient way to manage their clients' capital for a minimum amount of £50,000. He charges a monthly fee for Assetfirst, based on the number of registered individuals at the firm.
Whiteley praises the choice of ETFs on offer, and says he would like to see more smart beta strategies in the fixed income sector—the only asset class where he still uses an active manager. The adviser recently introduced First Trust's AlphaDex ETFs into his portfolios and has been pleased with their reduced volatility and improved performance.