Ovation Finance

I’ve heard of Wraps, what are they exactly?

Over the years, Ovation has experienced difficulty in finding good policies and investments within the UK market place which provide clients with choice, clear and easily understandable charging structures, flexible and easily accessible administration processes.

We have therefore been searching for some time for a way our clients can access the UK retail and institutional investment market place, independent of the insurance leviathans and retail investment houses policies and charging structures.

One development over the years has been the idea of using a ‘wrap’, also known as a ‘platform’. This allows you to re-register and transfer existing assets and investments onto the platform, centralising your holdings. This consolidation of holdings reduces the paper work and administration on the account.

Why should a wrap be any better than holding investments directly?

When you hold individual investments in your own name, each time you want to make a change, you have to sell, receive the money into your account, write out a new cheque and application form, and submit the new investment, with new set up charges.

In contrast, the wrap allows you to switch between funds without the need to go through this time consuming and laborious process. It is a hub from which you can invest into pensions, bonds, unit trusts, ISA’s or even direct shares without the need for the investment to be administered through a number of different companies.

The platform will provide you with a clear and easily understandable pricing structure and allow you to invest into retail and institutional funds both of which (in the majority of cases) attract funds rebates and investment discounts reducing the potential impact of costs on your investments. There are a number of wraps now available, and, after much consideration, we have decided to work with the wrap administered by Ascentric.

Surely this means increased charges?

Ascentric do charge for this service (for details, see below), however overall there is a reduction in charges. This is because Ascentric offer centralised administration for over 100 IFAs’ clients, meaning they have far greater bargaining power with the investment houses.

As a result, all funds that Ovation recommend can be accessed at or around ‘creation’ i.e. nil initial charge. This is a saving of up to 5% to the charge you would face if you accessed these funds directly. In the rare event we recommend a fund that does have an initial charge, you will be advised, but it will still be much lower than you would be able to access directly.

How are the charges paid?

In making new investments the process will be much the same before, except the portfolio as a whole will be structured to hold a notional cash account from which costs will be paid. This allows you to have lower fund charges and price clarity, it also provides a holding place for the fund rebates from your investments to accrue. We will recommend circa 2% to 3% is held in this cash account at anyone time to cover these.

Will this help me keep an eye on my investments?

Ovation will provide you with an online account from which you can view your holdings and get real time price details and store your contract notes. The account will also provide you with access to free Morningstar research tools.

How do I get existing investments onto the wrap with the minimum of fuss?

Your existing investments will have to be re-registered onto the platform any new investments will follow the same process as you have invested before. In most cases this is approaching the registered provider and changing ownership to Ascentric, which ensures your existing investment does not have to be sold. In some cases the fund has to be encashed and then the assets transferred within its tax wrapper (such as ISA) and re-invested for you in the same fund. This can mean you are out of the market and miss out on potential short term investment growth. Please note that re-registration does not mean losing the tax wrappers the funds are invested in or changing your portfolio asset allocation or strategy, it is purely an administration exercise.

A minority of investment houses charge for this, and we will advise you when this is the case, the general cost is circa £25 per fund. However, in most situations, in spite of this cost the benefits of discounted funds, consolidation of your assets and administration flexibility should easily cover these costs in a short period of time.

Will I be out of the market when moving investments across?

As mentioned above, it is possible that you will be out of the market for a short period of time. Overall, however, we feel that any short term disinvestment from the market or initial costs faced easily outweighs the advantages the platform offers you and flexibility the platform will provide. In addition to this Ovation will reregister/transfer the assets to the new platform at no cost. Of course any new investments will be charged on the agreed terms.

What about individual shares?

Ovation is not able to advise on individually held shares. However, should you have a number of direct share holdings we can also set you up an account so that you can trade (if you require) online, or even just hold the shares online and get real time valuations of them. Please let me know if you require this. By using a wrap we can also reduce the amount of paperwork we send you saving both your time and the planet !

Can you give me more detail on the costs involved?

Your portfolio will be established with a notional cash dealing account from which all costs will be paid and any fund rebates to your portfolio will accrue. We recommend that you hold circa 3% to 5% of the portfolio in this cash account to cover any costs at any one time.

• The portfolio does not have any initial charges (excludes, offshore bonds, advisory costs and some SIPP wrappers).
• The portfolio has an annual management charge of 0.25% per annum (charged quarterly).
• Transaction costs for dealing occurs at purchase and at the point of sale, each transaction costs £12.50 per electronic trade (over 80% plus trades are) and £20.00 if paper trade is required.
• The selected underlying funds have additional fund charges on top of the platform charges. The funds on the Ascentric Fund platform receive very competitive discounts up to 50% or more. We have calculated, (based upon ONLY the core fund range on the Ascentric Fund platform) of 2300+ funds (at the 29th October 2008) the average initial discounted charge was 0.23%, the average annual discounted charge was 0.74%. These prices compare favorably to the market place as a whole. Fitzrovia calculated in 2006 the average Total Expense Ratio (total annual management expense) to be in the region of 1.63% for UK Collective Funds.

If you wish to re-register your assets/funds away from the Ascentric fund platform to a new provider an exit penalty per fund will apply of £15, up to a maximum total charge of £150.

For illustrations showing the impact of charges on an investment and further details on the Ascentric charging structure please refer to the Ascentric Key Features Document (KFD) from pages 5 to 12

http://www.ascentric.co.uk/pdf/KeyFeatures.pdf

What about the trail commission that gets paid by the investment companies?

Some investment providers pay an ongoing commission, usually 0.5% of the fund, and this amount is paid out whether the client wants it or not (incidentally, this is how certain discount brokers make their money). This is referred to as ‘trail commission’.

Unlike some wrap providers, Ascentric do not keep this trail commission, and instead it is paid into the cash part of your portfolio. This can then be used to settle Ovation and Ascentric costs.

Who are Ascentric?

Ascentric is a company formed from an old egg investment platform from the early 1990’s. Since then it’s moved from its direct client and IFA offering as funds direct to become a boutique player in the wrap market. Just after the start of 2003 Ascentric was created by funds direct and a number of IFA’s to create a bespoke platform offering true whole of market access for advisers and their clients with the flexibility to meet client administration needs in a wide variety of circumstances.

Since 2003 Ascentric has grown into a serious contender in the IFA market (predominately with Fee based advisers) as a suitable investment platform.

In recent years Ascentric has sold 75% of their share holding to Royal London insurance but fiercely holds onto their pioneering attitude and concept of independence.

Following a review of the market place Ovation feel now the time is right to move clients assets onto the investment platform as the technology has developed suitably and some rather annoying teething problems which had restricted the platforms flexibility has been solved.

In our view they remain a market leader in terms of attitude, investment in new development and their understanding of the Financial Planning market place.

Does Ovation get any advantage from using Ascentric?

There are a number of benefits to Ovation of using Ovation, the majority of which can be passed on to the client in the form of reduced fees. For example, the ability to view on line valuations means that clients will no longer need to come to Ovation for an ad hoc valuation, which we would have previously needed to put together manually. Such ad hoc valuations were previously charged for on an hourly basis, this will no longer be necessary.

Ascentric also provide an online dealing service this allows Ovation to invest/realise investments quickly without the nightmare of dealing with large investment companies and reduces the administration costs a clients faces when settling trades.

An incident of investing with Ascentric is that they will provide Ovation with partial equity of £2,500 in their fund platform per £1m of assets held with them. This is offered by Ascentric out of their own pocket, and is not reflected in the charging structure in any way. In no way was it a factor involved in our choosing Ascentric as our selected wrap provider, in fact Ovation selected Ascentric based upon clear pricing, flexible administration and choice, and the decision was made before we became aware of their offer.

How did you reach the decision to use Ascentric?

We have recommended Ascentric to provide you with more choice and flexibility with a clear and flexible charging structure than is currently available fro other providers. We have recommended them as they meet the Ovation company platform provider criteria following a review of the whole of the UK market place. If you would like to view this research and our commentary of them and other companies I would be happy to provide you a summary of this.

Overall the selection of Ascentric allows you the flexibility to be more proactive in the management of your investment portfolio alongside guidance from Ovation and give you access to a broader universe of investments and policies.