Describe your position and what a typical day looks like for you.
I am the head of portfolio operations at 8AM. My role predominantly involves the successful mechanical operation of the model portfolios on fund platforms, keeping everything running correctly and working closely with our adviser partners on analysis and commentary.
I am a member of the investment committee for the model portfolios, effectively joining up the work produced by Clever with our qualitative overlay. So I sort of sit in the middle, acting as a devil’s advocate for both sides. A great deal of the data collation and analysis work flows through me – essentially a central conduit that data and documents flow through.
What led you to 8AM and your current role?
Like most idealistic school boys, my first passion was to be a session bassist which I did successfully for about three years until I realised that session bassists don’t make much money and were very much at the back of the queue for any of the ‘benefits in kind’ that come with a professional music career.
After a period of reflection – or “personal liquidity crisis” – I left the music industry and moved back home. I did loads of odd jobs. I think I was a gardener at one point. I worked at PC World and Tesco. I worked for Domino’s. Maybe the odd off license or two. All sorts of normal jobs. Until I got sensible and thought investment was a good idea. I literally got the idea from TV and thought ‘the effort-to-remuneration ratio appears to be the right way’. I think I’ll give that a go. Now, I’d foolishly left school in the middle of college so I didn’t have any qualification or anything meaningful to my name that would allow me to do that, so my investment career started at a call centre for Hastings Direct (bear with me).
After two or three years I got a job in an investment brokerage firm doing general insurance. Then within that brokerage I started to write PII policies with a Lloyds Syndicate for advisers, and from there I managed to move sideways to an advisory practice. As an apprentice. I got a few of the R0 qualifications and to have my own clients, ran that book for a year and it was around that time that I met Jeremy and the other chaps at 8AM through a mutual acquaintance. And yes, it was in a pub. I was originally brought on purely as a business development manager and to help update some of their back office and CRM systems.
That was almost six years ago and during the first six months I gleaned that model portfolios were the direction of travel for the whole industry, marked by RDR as a turning point for everyone.
As a fully permissioned investment management business, we had the regulatory permissions and expertise to do this, we just needed to understand it the mechanics. So I started with smaller mandates with a couple of advisers that I knew locally and then the business grew around this idea of creating and maintaining portfolios that fulfil a specific advisory need.
8AM is small but we are very well staffed concerning levels of expertise and the experienced people involved in business so we can be plumbed into pretty much any situation and run a model on behalf of a third party.
How did this develop into a relationship with Clever?
Everything was working well and it was around year two of my journey with 8AM that we met Colum and everything grew pretty organically from there.
We have a great pool of talent at 8AM, and Clever is a great fit as it provides such a robust framework for fund selection, which is something that any investment manager would invariably struggle to reproduce in terms of the sheer volume of analysis required. We add our expertise and value in a straightforward and measurable way – and in many ways this is emblematic of the entire Clever investment story. We focus on the areas of investment management to which we are best suited, allowing Dynamic Planner and Clever as respective experts in each of their fields to complement our oversight and governance.
Our mandates are not “simple” as I fear investment never is! But they are straightforward to operate. Clever is complex in its underlying operations, but the ideas involved are relatively straightforward. The output from Clever says: “Here, these are the best funds, take them, blend them together in a way that makes sense”. From this perspective, the questions that we’re asking are fairly straightforward. The output is complex but it’s quantifiable, reliable and scalable. These are small questions that our team can answer quickly.
Now, if the question was broader – just ‘make more money than everybody else in the multi-asset space’, and there are thousands of ways to attempt to achieve that, then you waste time in the weeds trying to work out every possible factor to analyse, and before you know it, two quarters have passed without a meaningful investment decision being made! Clever is able to tell us objectively that a fund will (on balance of probability) give us the best chance of outperformance, we’ll hold it, and when it says a fund doesn’t work – we sell. It creates clearly definable value for the investor – and that’s really compelling.
So the system does all of the legwork that it’s really not practical for a human to do anymore – giving you space to add value to the whole process?
Yes, 100%. My musical experience tells me that people are often the most creative and productive when you give them a firm set of guidelines to work within. The beauty of the process is that it’s nimble by nature and we as a team have always prided ourself on acting quickly because of our efficient size and open collaboration between managers and departments. Statistically speaking, the funds that the Clever system selects are going to have merit, and it’s our job to simply stack those funds in a way that makes sense. And that task can be completed within two or three days. Compare that with many investment processes where a decision might take weeks – and is largely prompted by external market noise rather than independent scheduled review.
What sort of headwinds are you expecting over the next few years? What sort of things do you think are going to impact that space?
I’m certain the regulatory framework and guidance from the FCA that allows model portfolios to operate is one that will develop rapidly in the coming months and years.
The largest issue is simply ensuring that providers in the marketplace are operating with a very robust and accountable framework – contractually speaking between the DIM and the adviser and, by extension, the end client. I worry that some providers are somewhat vague in their adviser agreements and documentation as to what roles and responsibilities are held by all parties and what the manager actually intends to do to grow the portfolios effectively.
I speak of course to a minority of firms, but I worry that a knee-jerk tightening of regulation to combat this wouldn’t be very helpful to the sector if applied with too heavy a hammer. I think a heavy approach is unlikely due to the investment managers being so well-regulated, but the manner in which we all conduct our MPS business with advisers is still largely based on best practice amongst peers.
The trifecta of transparency, suitability and risk are cornerstones of the industry. The industry as a whole needs to do more to help advisers understand and define the relationship between MPS provider and adviser. I sometimes worry about solutions that aren’t independently risk profiled. Under our contract, we have to ensure that we never deviate from our risk mandate, and before we make changes to the portfolios, we proactively ensure that we’re going to hit the risk target with Dynamic Planner so there’s no risk of drift.
In a perfect world an adviser would use a suitability framework, risk profiler and ATR questionnaire which would all be plumbed directly into the model portfolio provider. Which is why I’m always so pleased when people use Dynamic Planner or one of our other risk profilers because it’s joined up and there are no advice gaps.
Ultimately we’re creating a framework that is robust, not just in terms of the fund selection process, but also where the adviser can be confident that the solution they’re recommending on Monday will be conducted with the same impartial diligence on Thursday.