Tackling estate planning is essential if you want to make sure as much of your wealth as possible goes to loved ones. This case study illustrates how easily even complex affairs can be optimised with a wealth manager.
Paul Killik, Senior Partner and founder of Killik & Co, explains his firm’s approach to helping affluent investors and their families achieve their financial goals – with intergenerational wealth management a key focus.
Relationships have always been at the core of our offering. We are an independent partnership providing a personal, approachable service that marries both our investment and our financial planning expertise into a wealth planning experience. We aim to develop long-term relationships with clients of all sizes to help them preserve, grow and protect their assets.
To achieve this end every portfolio client is allocated both a broker and a Chartered Financial Planner, one of whom would be the main access point for administration. Both are there to offer their expertise whether it is the broker for investment advice and execution or the planner, for the overall and ongoing structure of a client’s affairs.
The firm’s philosophy has always been to act for clients as those clients would act for themselves if they had the same knowledge and experience.
Our principle service is The Panel Portfolio. It is designed for portfolios of upwards from £750,000. Recognising the growing demand for simplicity in pricing we just charge 1% (plus VAT) on the value of managed assets with a commission of £30 on each trade.
The essential and unique point of difference of The Panel Portfolio is that it stands between the single portfolio manager, who tries to be an expert in everything, and the employment of specialist investment management skills through funds, which are inherently expensive – not least of which because it also requires another manager to select the fund managers.
Within The Panel Portfolio the broker, in consultation with the planner, determines the asset allocation between different available panels, and these primarily include Fixed Income, Mid Cap, Small Cap, Large Cap Global, one for growth and another with an income bias, and Geographically Orientated for which we use funds. A full list of all the panels is available and each is run by a specialist team. A Cash Panel is also provided.
The Broker is responsible for managing the Large Cap Global Panels, holding very largely to a model produced by our research team: this is in order to achieve some consistency of performance. However, at the same time we permit the broker some freedom to explore their own ideas from qualifying investments.
However, Killik & Co has always sought to help the saver and those that aspire to have larger portfolios. So what else do we offer?
We are one of the few remaining houses to provide advised portfolio services to clients who have the time, interest and experience to make their own decisions, aided by the investment ideas from their broker. There is no minimum size for an advised portfolio.
Nor is there a minimum size for Multi-Manager, a funds-based managed service. For portfolios of over £100,000 but without the minimum sum necessary for The Panel Portfolio we offer our Managed Portfolio Service, a traditional discretionary service investing directly into equities, bonds and funds. Once an investment strategy has been agreed, we will manage the portfolio and provide clients with relevant written updates, regular valuations and meetings.
Clients in any of our portfolio services will automatically have a wealth planner appointed to their account. Using a tool called SecureLife, we are also able to graphically project the future cash flows of a given client against projected expenditure to help in the planning process toward meeting their long-term financial expectations.
Our average client is 55 years old and has been investing with the firm – typically via the same broker – for at least 10 years. Many of our clients didn’t start out with significant assets but having diligently invested modest sums into PEPs, ISAs and SIPPs, out of income over many years, they now hold sizeable portfolios.
We try to encourage our clients to think intergenerationally. If 19th century families were parents and children; 20th century families were grand-parents, parents and children; then 21st century families will increasingly become great grand-parents, grand-parents, parents and children: four generations alive at the same time. We need to encourage the elders to think of the very youngest using JISAs and Junior SIPPs to give them the chance to enjoy the long-term power of compounding, rather than the conventional approach of just passing assets to their immediate children.
Many clients will prefer to start a relationship on an advised basis to give time for each to know the other and for trust to develop. Trust and the chemistry between two individuals are the two most important ingredients in a successful long-term relationship.
In pursuit of this every client has a “partner responsible” appointed to their account and an important part of their role is to try to understand whether or not the chemistry is working. We would rather switch a client to another broker than see them leave the firm because they didn’t get on.
In the last 10 years the internet has transformed the investment scene. Previously it was difficult, if not impossible, to pursue global investment themes as you couldn’t be sure what competing products were being developed in other parts of the world. As a consequence investors were understandably parochial in their approach.
Global investment themes have become central to our investment strategy. Technology is massively disruptive and no company, irrespective of their size, can be safe from disruption.
Markets have also become much more global and companies do not necessarily list on their local market if their industry is better understood and better followed in another market. By way of example, the S&P 500 index is about 20% tech and 1% mining; London is about 6% mining and 1% tech. One’s country of residence should not determine the sectoral balance of one’s portfolio.
Recognising the increasing speed of broadband we were the first private client firm in the UK to use video to communicate with our clients, about five years ago. Around two years later we built our own television studio, in our Mayfair office.
Our weekly Market Update podcast is generally less than 10 minutes in length and is published on Friday, rounding up the week and giving some views on the forthcoming week.
We also use our studio facilities to broadcast interviews with leading fund managers and some company managers. However, we are becoming increasing well known for our educational videos written and delivered by Tim Bennett, our editor. Tim produces a weekly called “Killik Explains”, which covers a broad range of investment topics and is offered free to clients alongside our educational guides and comprehensive online glossary. We have recorded over 100 “Killik Explains” podcasts and they can be found at www.killikexplains.com.
We have a large research team with analysts in large cap UK and global equities, as well as UK small, mid cap and AIM, where we offer an IHT Service.
We are one of the few private client firms with a dedicated team of credit analysts, giving us the skills to invest directly into fixed income bonds, which we prefer to bond funds. Notwithstanding our view on bond funds, we also have a large and very well-regarded funds research team.
Our research team also produces a “Daily Note”, which is available to all clients and is the team’s primary publication to keep clients up to date on their views. Research notes are sent to holders of stocks as well as other clients that brokers consider might be interested.
Clients like the fact that we are an independent partnership – a business owned by its practitioners. They recognise that this structure permits us to take a longer-term view of our growth without the pressures on quarterly results so often faced by our competitors.
This has allowed us to eschew the consolidation approach to growth. All our brokers, and now our new wealth planners as well, are home-grown, trained by ourselves. This provides a consistency to our approach.
Clients also like our High Street approach, with easily accessible shop/offices. From our earliest days we always sought to help people to get onto the savings ladder and whilst the average size of a new client to the firm is significantly larger than it used to be, we have never lost sight of our roots. Our educational work is testament to that as is the family orientation of our approach, where we will encourage a great grandparent, who can, to open a JISA for a recent family arrival.
The more knowledgeable of our clients recognise the importance of trade execution. We employ a team of highly-experienced traders who execute roughly half of all our client trades manually in pursuit of price improvement. Whilst it is difficult to achieve meaningful price improvement in the larger more liquid stocks, it can be meaningful in smaller and less liquid stocks. It is also important to encourage patient trading and the use of auctions.
Working closely with our dealers is our derivatives team, able to help and advise clients on hedging strategies. We also have a currency team to facilitate non-market related currency transactions for clients on much more favourable terms than the banks offer.
Our tax services are an inexpensive add-on that an increasing number of our clients enjoy. This is particularly true of those who only need to complete a tax return because they have investment income. Where their investments are held by us, we can easily add the information to their tax return before submitting it for them, thereby minimising the cost.
Lastly, I would mention our wills and trusts service, allowing us to advise and prepare wills and act as an executor, putting together and administering trusts, including preparation of the accounts and submitting the tax returns. We also offer a very inexpensive personal charitable trust. For many clients we treat this as another wrapper like an ISA or a SIPP.