The last 12 months have presented a period of unprecedented change in the advice industry as advisers, wealth managers, and many others within the financial services profession, work to adhere to the changes brought about by Consumer Duty. In this exclusive interview with Wealth DFM Magazine, M&G Wealth’s Chief Investment Officer, Shanti Kelemen, explains how her team continues to improve in an ever-changing industry and outlines what she believes is good service.
A more regimented, client-centric stance is, without doubt, a necessary and mutually beneficial approach as advisers and wealth managers are now compelled to deliver the very best service. For those who have complied, it has ensured a higher industry standard, but for those who have embraced the change, it has produced a world of outstanding client outcomes.
M&G Wealth is one of the firms that have always tried to place the client at the centre of everything that they do, even when they are unlikely to ever come face-to-face with the client receiving the benefits of the chosen strategy.
Whether it is through clear and transparent communication, de-jargoning of complex documents or openness on investment approach, M&G Wealth aims to support advisers to deliver the best service, as well as investment performance, for their clients.
Areas such as client communication and openness on fees, clearly come to the forefront of the conversation. However, Shanti also presents her thoughts on M&G Wealth’s investment approach through their MPS service and highlights ways in which her team’s methods stand out in a crowded market, as well as the key areas that the whole profession, including M&G Wealth, can continue to strengthen.
Wealth DFM: The advice industry is going through a significant amount of regulatory change at the minute. How have you adapted your proposition to help advisers?
Shanti Kelemen: “One of the big challenges advisers have is being able to demonstrate that they’re giving ongoing service. Model portfolios are a great investment offering to make it easier for advisers to showcase their level of service because you’ve got an array of factors to discuss, including holding all the individual funds and being able to talk about how fund holdings have changed. As investment managers, we can give advisers communications they can use with their clients, demonstrating that they’re in constant communication with the fund manager and client about what’s happening in the models. We can add further value here by also giving advisers information that they can use in conversations with their clients. We know that there are always more things landing on advisers’ desks. Therefore, our role is to think about what we can do to make their lives easier, to make processes more efficient, and to help them with some of those aspects of communicating with clients.”
“I think having better education about what’s happening in your portfolios can help customers avoid making bad decisions. There’s an element that at the start of an investment journey, an investor may say they can tolerate some volatility, but they never really know what losing 10% or losing 15% feels like until it happens. If you can have all the communications there to help people get through those times, that can help people focus on the long term rather than the short term. One of our aims has been to ensure as many of our documents as possible are approved for use with retail customers. We don’t want to hide behind a ‘for advisers only’ stamp because we want that information, as much as possible, to be able to be shared with the customer, meaning advisers can avoid having to create their own documents or their own narrative and updates, saving them time in the long run.”
Wealth DFM: Consumer Duty has prompted everyone to improve their processes. Are there any good or bad practices that you’re seeing in the market at the minute?
Shanti Kelemen: “One of the good practices we are seeing is that Consumer Duty has forced us to focus less on making big sweeping changes and more on small impactful adjustments that have greater impact. For example, when M&G Wealth entered the market, we acquired another company that didn’t include the investment management fees in the performance track record. That was an easy and instant fix, as it isn’t fair to show a client’s performance and not account for the fees that are taken out. You do still see some firms doing that, so that’s one thing to be on the lookout for when looking for the right investment manager.”
“Another area we have improved is that we have made our target market more specific. We looked at whether any aspects of our service could harm vulnerable customers, and we also set up mechanisms to get regular feedback from advisers and make that feedback loop much shorter from hearing about a problem to fixing it, and that’s really helped us be more responsive.”
“Of course, there are still areas that the industry needs to improve upon, including picking better benchmarks and ensuring that they are not too easy to meet. Some of the value assessments need a little work as they are very light on detail and don’t really allow you to understand how someone determined a proposition is adding value. But this market is crowded, and advisers are always pushing us to do better, our competitors are also pushing us, and this helps us as an industry. Everyone’s pushing each other to be better.”
Wealth DFM: What does good service look like for you?
Shanti Kelemen: “At M&G Wealth, it’s about focusing on both the end client and the adviser. The challenge here is that due to the model we use, we’re unlikely to ever see the customer, and thus, all our communication is done through the adviser. Therefore, we’re always asking advisers whenever we see them: what are your clients asking about? What can we do to help you communicate with them? Good service is also about making sure that people can get what they need from you when, how, and wherever they want to get it. So, if they want to get it online, it’s online, if they want to email someone, there’s a prompt response, if they want to call someone, the phone is answered. People want to communicate in different ways depending on their schedule, their questions or even just what type of day they are having. It’s important then to make sure that accessibility is there in terms of forms of communication but also in the way we communicate it, which means no jargon.”
“I think jargon can sometimes hide a lack of knowledge or a lack of clarity, so jargon-free, prompt and transparent communication is always the aim for us to achieve good service. You always want to tell advisers what’s happening as soon as it occurs so that they’re never caught in a situation where actions are happening in an account, and the client phones them to see what’s going on, and they don’t know. It’s also vital to be honest in these conversations when you don’t get things right or an investment approach isn’t working. There’ll always be times when you’re wrong, and I think just being honest builds more trust in the long run. People always make mistakes, and it’s more about what you do to make it right than the fact that you did something wrong in the first place.”
“The last point to make is regarding operational excellence. I’ve seen a lot of chatter in the market with these broad-brush statements saying you can’t manage MPS on platforms well, and there’s too much variance, and I think it’s all a bit of bluster. It is very possible to do it. We use the same funds on all available platforms, we trade all our models on the same day, and we have multiple checks to make sure we don’t have errors. You just need a skilled team and robust processes. Those aren’t the sexiest or most glamorous things to do, but they are important to that good service element you aim to deliver to advisers. Doing these things means that advisers can trust you, they know that you’re going to get it right 99% of the time and the 1% you don’t, you’ll fix it.”
Wealth DFM: MPS is a very crowded market. What are your key investment themes, and how do they differentiate you from other available solutions?
Shanti Kelemen: “We take very distinct views on our asset allocation. We’re not a team that just adopts the same views as everyone else and sticks to them. That does take a lot of courage in this market where there’s a big focus on short-term performance. If you’re an active manager, and you take different views, you’re going to have to accept that you’re going to be wrong occasionally, but you need to have the courage to believe in yourself and what you’re doing. We have a very long-standing asset allocation process, and that basically gives us courage as we’ve been through those times before when we’ve been wrong. However, eventually, if we stick to our principles and avoid having a short-term view, we achieve the things we set out to do.”
“Another factor that differentiates us is the size and scale of our team which enables us to be a lot more granular and specific. For example, within fixed income, we invest in European corporate bonds, US corporate bonds, UK corporate bonds, emerging market local currency, and emerging market hard currency. We do that whole spectrum, and we don’t just buy global bond funds. I think that’s going to be important in the future because when interest rates were around zero, the returns from many bond markets were similar. But if you’re in an environment where inflation is at varying levels and interest rates are changing differently, you could see a lot of divergence in those markets. We think fixed income is going to be a bigger driver of returns.”
“We do have less US equity exposure just now than a lot of our peers. There are a lot of great companies in the US, and there are strong earnings today, but when we look at the data, starting where valuations are today, you’d never see 6-8% annualised returns delivered from the current valuation point over the next 5 to 10 years. You might see that over the next 1 to 2 years and that’s where our principle of long-term investing comes in. Looking at other areas, we have more held in corporate bonds and a bit less assigned to government bonds just because the yields are much more attractive.”
“Then, lastly, we also have an allocation to alternatives. I think that’s something that’s starting to be more of a differentiator between managers. We’ve seen some people just using bonds and other people using alternatives. When inflation is a bit higher, you tend to see bonds and equities being more correlated, so we think it’s going to be important to have alternatives in the models because when you do have those periods when equities and bonds are a bit weaker, it should help drive performance. That’s something that’s been a little bit of a drag for us the past year because equities and bonds have generally performed well. But then again, it’s about looking to the future and assessing different scenarios rather than just supporting the flavour of the moment.”
Shanti Kelemen
Chief Investment Officer, M&G Wealth
Shanti joined M&G Wealth Investments in November 2021 as Chief Investment Officer. She is responsible for the development and ongoing management of discretionary investment solutions offered by M&G Wealth Investments. Prior to joining M&G, she worked in private banking for 10 years. She held the role of Investment Director at Brown Shipley, with responsibilities for communicating investment views, improving investment processes and integrating acquired businesses. Whilst working at Coutts, she was a director on the portfolio management team, and managed multi-asset advisory and discretionary portfolios. She is a regular guest on BBC’s Radio 4 Today and Wake Up to Money programmes. She holds a PCIAM qualification and a Masters in Management from the London School of Economics.
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