Royal London [with Governed Portfolios/Fixed or Flexible ...

  • Docx File 425.85KByte



Investment Suitabilityreport DATE \@ "dd MMMM yyyy" 22 February 2021This sample ‘suitability wording’ contains detailed information about the investment options from Royal London and has been designed to assist you in formulating your own client suitability report.It’s important that within your suitability report you clearly explain to your client why you’re recommending your proposal and how it meets their financial goals and objectives. Within the FCA’s guidance about suitability reports, they also mention how the report should:provide a balanced viewdetail the costs and charges involved andhighlight any potential penalties that may be linked to your recommendation.If your client is already saving for their retirement, but as part of your proposal you’re recommending they cancel their existing plan and transfer their benefits to a new plan with Royal London, in addition to providing a like for like comparison, the FCA will also be checking to make sure that good and appropriate advice has been provided.To help with your advice process, we’ve highlighted below the following points which you’ll need to consider when producing your suitability reports. We’ve also included some of the points highlighted by the FSA in their 2008/2009 Thematic review:knowing your client – finding out what their financial needs and objectives are.analyzing their existing arrangements – reviewing their existing arrangements and identifying any shortfalls.researching new plans – identifying suitable new plans and their benefits.identifying suitable investment options – identifying their suggested attitude to risk and recommending suitable investment options.carrying out regular reviews – regularly reviewing their circumstances and ensuring their investment options remain suitable.It’s important that you produce your suitability report in line with your own compliance requirements and that if you’re advising any client to transfer their existing plan to a new provider, that you’re authorised to do so, it’s in their best interests and it meets the FCA rules.Note to adviserIf you’re using this template to form the basis of your report, you should delete the text from this front page including this note.Royal London [with Governed Portfolios/Fixed or Flexible Lifestyle Strategy/External Investment Options/Governed Retirement Income Portfolios/Custom] suitability report prepared for [Name of client].The contents of this report and the recommendation was provided by [Insert name and address of financial adviser].Date of initial meeting(insert date)Date of follow up meeting(insert date)Date of suitability report(insert date)Date service agreement signed(insert date)Contents TOC \o "1-2" \h \z \u Contents PAGEREF _Toc64641556 \h 4Asset types explained PAGEREF _Toc64641557 \h 6Deposits PAGEREF _Toc64641558 \h 6Corporate Bonds and Gilts PAGEREF _Toc64641559 \h 6Equities PAGEREF _Toc64641560 \h 6Mixed Assets PAGEREF _Toc64641561 \h 6Property PAGEREF _Toc64641562 \h 6Specialist PAGEREF _Toc64641563 \h 6Governance PAGEREF _Toc64641564 \h 7Who’s on the committee? PAGEREF _Toc64641565 \h 7Responsible investment PAGEREF _Toc64641566 \h 8Risk profiling PAGEREF _Toc64641567 \h 9Risk attitude PAGEREF _Toc64641568 \h 9Our suggested risk profiles PAGEREF _Toc64641569 \h 9Investment options PAGEREF _Toc64641570 \h 12The range includes; PAGEREF _Toc64641571 \h 12Fund Range PAGEREF _Toc64641572 \h 12Governed Portfolios PAGEREF _Toc64641573 \h 13Governed Retirement Income Portfolios (GRIPs) PAGEREF _Toc64641574 \h 13The Matrix PAGEREF _Toc64641575 \h 14Target Lifestyle strategies PAGEREF _Toc64641576 \h 14Flexible Lifestyle strategy PAGEREF _Toc64641577 \h 16External Investment Lifestyle strategy PAGEREF _Toc64641578 \h 16Customised PAGEREF _Toc64641579 \h 16Asset types explainedRoyal London have over 160 funds to choose from and some of our investment options hold a mix of assets, such as company shares, bonds, property and cash. Others may invest in a single type of asset. The main asset types are summarized below:DepositsThis term is used to describe investments such as cash and short-term fixed interest investments. They work in much the same way as a bank or building society account. Investments are put on deposit with a financial institution where they earn interest. Deposits are generally considered safer than other asset classes; however, over the longer term.Corporate Bonds and GiltsCorporate bonds are loans to companies for a set period. During this period the company pays interest and eventually returns the original amount.The main risk with a corporate bond is that the company to which the loan has been made might go bankrupt and fail to pay it back. Corporate bonds tend to be less volatile investments than company shares but provide the opportunity for higher growth than deposits.Gilts are loans to the Government and work in much the same way as corporate bonds. However, gilts are considered very safe investments - since the Government is unlikely to go bankrupt.To date, the British Government has never defaulted on a gilts issue. Like corporate bonds, gilts tend to be less volatile than company shares but provide greater opportunities for growth than deposits.EquitiesEquities are company shares. Limited companies can sell their shares to raise capital, paying a share of their profit (known as a dividend) to the buyer in return. Shares are bought and sold on the stock market, and their prices fluctuate based on a number of factors including the company’s potential profitability. As a result, they tend to be too volatile for short-term investors. However, it is widely accepted that equities have the potential for better returns over medium and longer terms. It’s also worth bearing in mind that equities traded on some overseas stock exchanges can be more volatile than UK equities. They are also affected by fluctuations in currency exchange rates.Mixed AssetsSome funds will invest in a mixture of different asset classes such as company shares, property and deposits. This way, if one particular investment performs poorly, you won’t be as badly affected because your risk is spread more widely.PropertyWe invest in high quality commercial and industrial property such as industrial estates, office buildings and high street retail units. The returns received are linked to the valuation of these properties and the rental income received. The managers make significant effort to redevelop existing properties to improve their appeal and to generate increased rental income.SpecialistSome funds have an investment universe that is not accommodated by the mainstream sectors. These will be included in the specialist sector. This sector is hugely diverse and will contain funds with various investment objectives and ernanceA key part of Royal London’s investment proposition is the governance provided through the Investment Advisory Committee (IAC).The Investment Advisory Committee (IAC) reports into the Royal London board, whose remit covers every aspect of the running of our Unit Linked fund range. Critically the committee operates independently of Royal London Asset Management (RLAM), who have day-to-day running of the Royal London funds.The Investment Advisory Committee (IAC) meets on a regular, usually quarterly, basis to review our risk-graded Governed Portfolios and fund range.To help the IAC make these decisions, they review a substantial amount of material each time. This includes confidential Morningstar OBSR fund reports, a comprehensive risk report from Moody’s Analytics and market commentary from Royal London Asset Management, who manage the internal fund range.A summary of each committee meeting is published as soon as possible following the meeting. To view the latest summary or a list of previous summaries please visit our website investmentgovernance.Who’s on the committee?The IAC comprises of five pensions and investment experts:Candia KingstonIndependent chairpersonJB BeckettIndependent representativeDr James McCourtChief Risk Officer,Royal London Asset ManagementPiers HillierChief Investment Officer,Royal London Asset ManagementEwan SmithChief Executive Officer, Office Director. Royal London IntermediaryResponsible investmentAs one of the UK’s largest mutual insurance and pension provider, we’re committed to being a responsible investor. This means we aim to generate good returns whilst also making a positive contribution to our society and environment.Good governance has always been important to us, but going forward, we’ll be more proactive in asking our asset managers to include financially material environmental, social and governance (ESG) risks and opportunities when they make investment decisions.We’ve also asked our asset managers to help us fulfill our stewardship responsibilities by working with the companies we invest in to improve the way they’re run – for example, by voting our shares, meeting with company management, or pushing for higher industry standards.We believe this can help to manage risk, support informed investment decisions, and help to generate better long-term results for our customers.Risk profilingRisk attitudeWithin this part you’ll need to include details about your client’s suggested attitude to risk. You may want to include information about how risk averse they are and the length of time they have until they retire. You should base your recommendation upon investment options that are suitable for them and which does not expose them to an unnecessary level of risk.Here are some suggestions about what information you may want to include:It’s important to explain to your client that the level of risk they take with their investment decisions increases the chances of greater rewards as well as the possibility of greater losses.You’ll also need to point out to your client that their investments can go down as well as upIf you’ve gone through a risk questionnaire with your client, you’ll need to discuss the outcome from this tool and ensure your client agrees with your recommendation and their suggested attitude to risk. If you’ve used our risk profiling questionnaire the following information may help you to give your client an idea of their attitude to risk;Governed rangeIt is important to match your asset allocation to your risk attitude. The Governed Range does this for you. Each option has been designed for a particular risk attitude which means we take care of the asset.All about riskRisk exists in a number of different situations, but your main concern is with financial risk, which is the volatility associated with the prices on and returns from investments.It is important to remember that investment returns may fluctuate and are not guaranteed, and you might not get back the original value of your investment.Risk attitude profilingThe more risk you are willing to take with your investments, the higher the potential return - but the greater the chance of loss. Lower risk investments on the other hand offer greater security but lower potential returns.Risk toleranceYour risk tolerance will depend on your financial circumstances and goals. Financial risk tolerance can be split into two parts:Risk capacity - the ability to take riskThis relates to your financial circumstances and your investment goals. Generally speaking, someone with a higher level of wealth and income (relative to any liabilities they have) and a longer investment term will be able to take more risk, giving them a higher risk capacity.Risk attitude - the willingness to take riskRisk attitude has more to do with the individual’s psychology than with their financial circumstances. Some will find the prospect of volatility in their investments and the chance of losses distressing to think about. Others will be more relaxed about those issuesOur suggested risk profilesYour risk level (delete or amend as appropriate)To help identify your attitude to investment risk, we have used Royal London’s risk attitude profiling questionnaire. Based on the answers you gave, your attitude to risk has been defined as [very cautious / cautious / moderately cautious/ balanced / moderately adventurous / adventurous / very adventurous]. (select relevant definition from list below)Very CautiousVery Cautious investors typically have very low levels of knowledge of investment matters and very limited interest in keeping up to date with investment issues. They are unlikely to have experience of investment, having only saved into bank accounts.In general, Very Cautious investors prefer knowing that their capital is safe rather than seeking high returns. They are not comfortable with the thought of investing in the stockmarket and would rather keep their money in the bank.Very Cautious investors can take a long time to make up their mind on investment matters and will usually suffer from severe regret when their investment decisions turn out badly.CautiousCautious investors typically have low levels of knowledge about investment matters and limited interest in keeping up to date with investment issues. They may have some limited experience of investment products, but will be more familiar with bank accounts than riskier investments.In general, cautious investors do not like to take risk with their investments. They would prefer to keep their money in the bank, but may be willing to invest in other types ofinvestments if they are likely to be better for the longer term.Cautious investors can take a relatively long time to make up their mind on investment matters and can often suffer from regret when investment decisions turn out badly.Moderately CautiousModerately Cautious investors typically have low to moderate levels of knowledge about investment matters and quite limited interest in keeping up to date with investment issues. They may have some experience of investment products, but will be more familiar with bank accounts than riskier investments.In general, moderately cautious investors are uncomfortable taking risk with their investments, but can be willing to do so to a limited extent. They realize that risky investments are likely to be better for longer-term returns.Moderately Cautious investors can take a relatively long time to make up their mind on investment matters and may suffer from regret when investment decisions turn out badly.BalancedBalanced investors typically have moderate levels of knowledge about investment matters and will pay some attention to keeping up to date with investment matters. They may have some experience of investment, including investing in products containing riskier investments. In general, balanced investors understand that they have to take investment risk in order to be able to meet their long-term goals. They are likely to be willing to take risk with part of their available assets.Balanced investors will usually be able to make up their minds on investment matters relatively quickly, but do still suffer from some feelings of regret when their investment decisions turn out badly.Moderately AdventurousModerately Adventurous investors typically have moderate to high levels of investment knowledge and will usually keep up to date on investment issues. They will usually be fairly experienced investors, who have used a range of investment products in the past.In general, Moderately Adventurous investors are willing to take investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with a substantial proportion of their available assets.Moderately Adventurous investors will usually be able to make up their minds on investment matters quite quickly. While they can suffer from regret when their investment decisions turn out badly, they are usually able to accept that occasional poor outcomes are a necessary part of long-term investment.AdventurousAdventurous investors typically have high levels of investment knowledge and keep up to date on investment issues. They will usually be experienced investors, who have used a range of investment products in the past, and who may take an active approach to managing their investments.In general, Adventurous investors are happy to take investment risk and understand that this is crucial in terms of generating long-term return. They are willing to take risk with most of their available assets.Adventurous investors will usually be able to make up their minds on investment matters quickly. While they can suffer from regret when their investment decisions turn out badly, they are able to accept that occasional poor outcomes are a necessary part of long-term investment.Very AdventurousVery Adventurous investors typically have very high levels of investment knowledge and a keen interest in investment matters. They have substantial amounts of investment experience and will typically have been active in managing their investment arrangements.In general, Very Adventurous investors are looking for the highest possible return on their capital and are willing to take considerable amounts of risk to achieve this. They are usually willing to take risk with all of their available assets.Very Adventurous investors often have firm views on investment and will make up their minds on investment matters quickly. They do not suffer from regret to any great extent and can accept occasional poor investment outcomes without much difficulty.I have enclosed a report that confirms your answers to the risk questions and gives you an idea of your risk category. (delete if not provided)Investment optionsThe range includes;Fund RangeGoverned PortfoliosGoverned Retirement Income PortfoliosThe MatrixTarget Lifestyle StrategiesExternal Investment Lifestyle StrategiesCustomised optionsFund RangeAt the center of a client’s plan is the Core Investments. The Core Investments are made up of Royal London’s own funds that are managed internally by Royal London Asset Management (RLAM) as well as a range of funds from carefully selected leading external fund managers.Royal London currently offer over 160 individual investment funds available from a wide range of fund managers. The range of funds and fund managers gives you a choice of different investment styles and exposure to different geographical areas.Fund managersIf you would like to know more about any of the fund managers please visit Royal London’s website pensioninvestmentsGoverned PortfoliosThe importance of choosing the appropriate mix of assets in order to meet investment objectives is widely recognised and Royal London’s Governed Portfolios can help with this.The Governed Portfolios identify suitable asset allocations - the proportion that should be invested in different assets/funds such as equities, property, fixed interest and cash – based on attitude to risk and length of investment. A total of nine portfolios are available covering various risk levels over different time horizons. This means whatever your attitude to risk and period of time until retirement there is a portfolio to suit you.All of the Governed Portfolios are subject to a strict governance process overseen by a panel of investment experts; Royal London’s Investment Advisory Committee. This Committee review and recommend changes to the asset allocation to reflect market conditions. This provides the peace of mind that the objectives of the Governed Portfolios will continue to be met over time.The Governed Portfolios are automatically adjusted back to the initial asset allocation on a monthly basis to ensure that the split between the different assets held within your Core Investments doesn’t drift away from that originally selected. This means you can be reassured that your plan is not exposed to greater investment risk than that selected at the outset.Another attraction of the Governed Portfolios is the flexibility to tailor them to your specific needs. As well as opting for the default options it is also possible to select specific equity funds from the full Royal London range to make up the equity element of the portfolios.For further information on each of the nine Governed Portfolios, please view the individual Governed Portfolio factsheets on pensioninvestments.Following our discussion, we have agreed that to meet your objective of ___________________________________________________________________________________Governed Portfolio _______ is the most appropriate one taking into account your attitude to erned Retirement Income Portfolios (GRIPs)If you’re taking income from your pension you can choose to invest in a GRIP. The portfolios are designed to suit customers with different risk attitudes and invest in a mix of equities, bonds and property funds managed by RLAM. There is also the option to replace the default equity fund – the RLP Global Managed fund – with an alternative equity fund or funds from a selection of fund managers available within our range.To view the Governed Retirement Income Portfolio factsheets, please visit pensioninvestments.Following our discussion, we have agreed that to meet your objective GRIP 1/2/3/4/5______________________________________________________________________________________________________________________________________________________________________would be most appropriate.The MatrixTo complement the Governed Portfolios, Royal London’s Fund Matrix categorises externally managed equity funds available through the Core Investments by sector (including UK, American, European and Worldwide equities) and level of tracking error risk – the level to which the funds vary from the benchmark for the sector. This fund categorization makes it easier to identify the type of equity funds available and to select suitable funds based on your individual circumstances. These funds can be held individually or as part of the Governed Portfolios.The funds within the Matrix were carefully chosen in conjunction with leading fund research group Morningstar Investment Management on the grounds of consistent performance and adherence to set risk parameters. Each of the funds has a clearly defined objective and is regularly monitored by Royal London’s Investment Advisory Committee to ensure it continues to be managed in a way that is conducive to meeting that objective. This means that whenever you invest in a Matrix fund you can be confident that you have selected a quality investment supported by a rigorous selection and governance process.Details of the funds held within the Fund Matrix can be found in the Fund Range Summary.Target Lifestyle strategiesThe Royal London Target Lifestyle Strategies are a range of pre-set Lifestyle strategies. A lifestyle strategy allows you to benefit from potentially stronger investment performance in the early years by investing in higher risk investment funds although this is not guaranteed. The accumulated fund is gradually switched into lower risk funds as retirement approaches.The pre-set lifestyle strategies are based on the Governed Portfolios. The Governed Portfolios are a collection of asset allocation that are designed for individuals with different attitudes to risk and terms to retirement.The Royal London Target Lifestyle Strategies have been specially created to provide a consistent investment approach that is regularly monitored and automatically updated. It means you can make investment decisions based on risk profile and asset allocation and be confident that a governance process is in place to ensure the strategy continues to meet its objective.For each risk category you can choose a Target Lifestyle Strategy to target either cash, annuity or drawdown. This will depend on how you plan to use your retirement savings and your choice will impact on the mix of assets you invest in as you approach retirement.Table 1Risk CategoryYour Lifestyle JourneyAt 15 yrs +At 10 yrsAt 5 yrsRetirementCautiousGoverned Portfolio 1Governed Portfolio 2Governed Portfolio 3Target Cash,Target Annuity,Target DrawdownModerately CautiousGoverned Portfolio 4Governed Portfolio 5Governed Portfolio 3Target Cash,Target Annuity,Target DrawdownBalancedGoverned Portfolio 4Governed Portfolio 5Governed Portfolio 6Target Cash,Target Annuity,Target DrawdownModerately AdventurousGoverned Portfolio 7Governed Portfolio 5Governed Portfolio 6Target Cash,Target Annuity,Target DrawdownAdventurousGoverned Portfolio 7Governed Portfolio 8Governed Portfolio 9Target Cash,Target Annuity,Target DrawdownThe asset allocation of each Governed Portfolio will depend on what the strategy is targeting at retirement. Please refer to the Strategy factsheets available on our website at pensioninvestments.There are three types of Target Lifestyle Strategy to choose from, depending on the equity funds you prefer -Target Lifestyle strategyThis lifestyle strategy invests the equity portion in the RLP Global Managed fund. This is an actively managed global equity fund that is automatically blended between UK and overseas equities as part of our governance review process.Target Lifestyle strategy – TrackerThis tracker option invests the equity portion of each portfolio in the RLP/BlackRock Aquila Global Blend fund. This is a global equity tracker fund that is automatically blended between UK and overseas equities as part of our governance review process.Target Lifestyle strategy – ActiveThis active option invests the equity portion of each portfolio in a specialist manager of manager fund RLP Global Blend Core Plus (Rathbones Global Alpha) fund. This is an actively managed global equity fund that is automatically blended between UK and overseas equities as part of our governance review process.As you approach retirement age, you’ll probably want to reduce your investment risk. Lifestyle Strategies are designed to help you do that. Your investments are gradually switched from higher to lower risk portfolios as you get closer to retirement. The Lifestyle Strategy is not compulsory. You can start or stop it at any time, but it must apply to all payments to your plan.Following our discussion, we have agreed that to meet your object of__________________________________________________________________________________the _______________________ Lifestyle strategy is the most appropriate one taking into account your attitude to risk.Flexible Lifestyle strategyA Flexible Lifestyle Strategy allows you to create your own lifestyle strategy using the Governed Portfolios. You choose the Governed Portfolios and the equity funds for terms 5, 10 and 15 years to retirement and Royal London will gradually switch your investments between these portfolios as you approach retirement.At retirement you can choose to target either cash, annuity or drawdown.The Governed Portfolios are a collection of asset allocations that are designed for individuals with different attitudes to risk and terms to retirement.Details of the flexible lifestyle strategy are provided in the Pension investment options – a clear and simple guide which can be found on pensioninvestments.Following our discussion, we have agreed that to meet your object of___________________________________________________________________________________the following Governed Portfolios and equity funds for terms 5, 10, 15 years will be used______________________________________________________________________________________________________________________________________________________________________External Investment Lifestyle strategyRoyal London also offer a range of lifestyle strategies managed by fund managers, 7IM, Brooks Macdonald, Schroders and Rathbones. These lifestyle strategies also target either an annuity or cash.To view the external investment lifestyle factsheets please visit pensioninvestments.Following our discussion, we have agreed that to meet your object of__________________________________________________________________________________the _______________________ External Investment Lifestyle strategy is the most appropriate one taking into account your attitude to risk.CustomisedYour adviser can create bespoke strategies or portfolios for you by using a choice of asset allocation and funds from the Royal London fund range.Following our discussion, we have agreed that to meet your object of__________________________________________________________________________________the _______________________ Lifestyle strategy is the most appropriate one taking into account your attitude to risk.Please note that it is important to remember that investments can go up as well as down in value and you may not get back the same amount you originally invested. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Online Preview   Download