IFA of the year: Chance for advisers to test their mettle

THE Scotsman IFA of the Year competition for 2010 is fast approaching take-off and time is running out for independent financial advisers to register their interest. The shortlist of advisers competing for the privilege of being named Scotland's top IFA is taking shape, but there is some time left for further names to be added to the list.

The 2008 competition was won by Keith Thomson, director of investment services at Dundee solicitors Blackadders. Thomson emerged victorious from a year in which advisers faced the toughest environment of their professional lives.

The outlook at the dawn of 2008 was mixed at best, but events were to take a dramatic turn for the worse, presenting a formidable challenge for our competitors. By October, most financial advisers were fielding increasingly panicked calls from clients worried not only about the value of their investments, but about the security of the banks holding their cash.

Yet every competitor was able to minimise the impact of the market volatility, and while they all recorded losses, they outperformed the market. In doing so, they demonstrated the value of financial advice and proved that good IFAs come into their own when the going gets tough.

This year's conditions are expected to be more benign, but the economic climate remains uncertain, interest rates are low, and while markets have settled down in recent months, the coming year is expected to be more of a volatility-scarred sideways move than one of significant growth. The UK is unlikely to be the place to be, yet the Far East and emerging markets, plus industry sectors including commodities, should offer ample potential for growth.

This time round, the panel of judges will include Bill Jamieson, executive editor of The Scotsman, and for the first time this year, the renowned City veteran Justin Urquhart Stewart, a director and co-founder of Seven Investment Management.

There will be monthly competition updates appearing in The Scotsman from next month. IFAs hoping to take part still have time to register their interest by e-mailing Raymond Ellis (at raymond. [email protected]) for more details of the case study on which the competition will be based and guidelines of the competition rules.

"Everyone participating in the previous two competitions found that it had helped to promote their business to the wider public," says Ellis.

Case study

CHRIS Anderson is a self-employed retailer who runs a small chain of specialist high-end fashion boutiques, throughout the Central Belt. His wife, Fiona is a newly-appointed partner in an Edinburgh-based law firm specialising in family law. They are both in their mid-30s and have no children.

Unfortunately, after a short illness, Chris's mother died and left her entire estate to Chris, who is an only child. To his surprise, the net estate after paying the inheritance tax liability was valued in excess of 1.25 million.

Now that Mrs Anderson's estate has been confirmed, Chris and Fiona have decided to clear the outstanding mortgage on their Edinburgh property, circa 250,000, and buy a small flat in the South of France for 150,000.

A further 450,000 has been set aside for a future business development and another 100,000 has been placed in two separate high-interest deposit accounts.

Chris's late father always took an active interest in the stock market and Chris is keen to do the same, but, because of his limited knowledge of financial matters, he is seeking the services of a professional independent financial advisor who can advise him on tax and investments.

Chris and Fiona have discussed their financial future at length and have decided to commit a minimum of 300,000 to an investment portfolio.

The couple have decided to take a speculative/growth approach with this investment, and are prepared to invest their funds for at least a five to ten-year period.

Given their recent experience with the Capital Taxes Office, Chris and Fiona are both determined to ensure that their nominated beneficiaries will not have to pay any inheritance tax on any part of their estate.

The challenge for competitors

1 Construct an investment portfolio for Chris and Fiona Anderson that will achieve their longer-term objectives and reflect their risk profile, as indicated in the case study.

2 The portfolio should consist of a maximum of 15 funds and must include a minimum of one and a maximum of three funds from each of the investment house sponsors.

3 Your portfolio can either consist entirely of sector funds, or you can choose to use a "core and satellite" approach – should you wish to use a risk-rated multi-manager fund.

4 You may "bespoke" your portfolio by using a maximum of three "wild card" funds, providing they are available on the Cofunds platform, see www.cofunds.co.uk

5 Switching and re-balancing can be completed online via the Cofunds website and will be charged at 0.25 per cent of the total value of the funds bought or sold.

6 Prepare an investment report for Chris & Fiona Anderson based on the information provided in the case study – construct an investment portfolio and justify your recommendations.

NB: Please e-mail your completed report before Friday, 22 January 2010 to: [email protected]