Just 4 per cent of Select Wealth Management funds bailed out during the shift from Sovereign to JMIS control, according to JMIS director, Andrew Kelleher.
Kelleher said 96 per cent of Select’s approximately $600 million funds under administration remained with JMIS following the now-completed handover from Sovereign.
“The very high take-up exceeded our expectations,” he said. “I thought the success rate would be lower, just based on the sheer complexity of the administration issues.”
Kelleher said the transition process differed depending on whether the underlying clients had UK pension money, custom-built investments, or invested via the Select model portfolios.
“Some agreements we were able to novate,” he said. “But with others advisers had to get clients to sign new forms and go through the AML [anti-money laundering] process… it was a lot of hard work for them.”
Those clients who cashed out of Select tended to be “lower balance”, Kelleher said.
“The average Select balance has gone up,” he said.
JMIS signed an agreement with Sovereign last May to take over Select after the ASB Bank-owned insurer declined to apply for a discretionary investment management service (DIMS) licence.
All DIMS providers – which Select is classified as – were required to have a licence in place by June last year.
Sovereign launched Select in 1998, offering advisers the opportunity to invest in a range of underlying products and/or a series of model portfolios administered on the ASB-owned platform, Aegis, with JMIS as investment adviser.
Kelleher said the arrangements with Aegis and other previous service providers remain in place following the legal transfer from Sovereign.
“We’ve also kept six staff from Sovereign who looked after Select,” he said.
While advisers can tailor investments for clients via the Select platform, Kelleher said the majority of money is held in the models with most future flows also expected to come through the pre-set options.
Advisers can rely on the Select DIMS licence when investing in the models, however, they would need their own ‘personalised DIMS’ authorisation to customise client portfolios on the platform.
Select offers five model portfolios ranging from conservative to high-risk managed by about 20 underlying local and offshore managers. The platform also lists over 70 securities and funds for customisation.
Kelleher said JMIS had recently de-risked its portfolios, dialing down the equities exposure across all the models.
“After seven years of up markets we thought it was prudent to pay attention to managing downside risks,” he said. “We still have exposures to growth assets but we’re taking a slightly more cautious position in all the portfolios – allocating more to fixed income and cash.”
He said to date Select hadn’t invested in any alternative assets – such as hedge funds – but JMIS was “consistently looking at alternatives”.
“At this stage we don’t have any alternative managers but that may change in the future,” Kelleher said.