A Generational Opportunity in Advice 1 August 2022
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To the maximum extent permitted by law, neither Drummond nor any of their associates, related parties, directors, officers, employees, advisers (including financial, accounting and legal advisers) or representatives make any recommendation in relation to the investments, or make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained in this document.
The information in this document has been provided by Drummond Capital Partners (ABN: 15 622 660 182) AFSL 534213. All the information in this document is general in nature and should not be considered personal advice. This document is not intended for public or third-party use.
This information is intended only for persons who qualify as wholesale clients (as defined in section 761G(7) of the Act) or sophisticated investors (as defined in section 761GA of the Act), (collectively, Qualifying Investors).
Past performance is not indicative of future performance. Please seek financial advice.
Disclaimer
This document is intended to provide potential Investors with general information only and does not constitute a product disclosure statement or any other disclosure document under the Corporations Act 2001 (Cth) (Act). This document has not been lodged with the Australian Securities and Investments Commission (ASIC) or any other government body or regulator.
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We are asset allocation specialists and focus on delivering high quality, risk aware, global multi-asset portfolio solutions, driven by our own proprietary research.
We founded Drummond Capital Partners in 2017 to deliver active, institutional grade investment management to wealth management clients.
About Us
We have extensive experience in delivering portfolio solutions for wealth management clients and provide significant support in client engagement and reporting.
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The Opportunity
5 The Numbers SIZE OF THE PRIZE $ 4 trillion90% PROPORTION OF UNADVISED AUSTRALIANS 14,964 NUMBER OF ADVISORS DOWN FROM 28,000 INCREASE IN PROFITABILITY USING MANAGED ACCOUNTS 38%15.8 HOURS PER WEEK SAVED WITH ACCOUNTSMANAGED 168 NUMBER OF HOURS IN A WEEK TO CAPITALISE Sources: AdviserRatings Financial Adviser Landscape Report, Investment Trends Managed Accounts Report, Praemium Business Health Report, Drummond Capital Partners
0% 5% 10% 15% 20% 25% 30% 35% 40% $0 $50 $100 $150
18 19 20 21 22 23 24 25 26 27 28 29 30 Managed Accounts $ bn (LHS) % of Platform (RHS)
Source: Drummond Capital Partners, IMAP
Managed Account Adoption is Growing $200 $250 $300 $350 $400 $450
• US Managed Account market grew from 2003 to 2015 at 14.6% pa
MANAGED ACCOUNT FUM BASED ON US MARKET EXPERIENCE
• Advisors need to adopt to maintain competitive advantage.
• Australian market was tracking at this rate however accelerated last year, growing 30% in FY22 and now $131 billion.
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• Over 50% of Advisors are now using managed accounts.
• As the market matures and investment processes institutionalise, this service will become best practice.
7 Enhanced Client Experience Source: Praemium Business Health: Profit Facts & Key Success Drivers Report May 2022 Business Driver Firms not using accountsmanaged Firms using managed accounts for 3+ years Firms with 75% of clients invested in accountsmanaged More time spent with clients - 45% 89% Improved client engagement - 59% 67% Client meetings per adviser, per week 5.9 7.8 (+32%) 7.8 (+32%) Adding 20+ new clients in past year 44% (+75%)77% (+77%)78%
8 Efficiency & Scale = Profitability Business Driver Firms not using accountsmanaged Firms using managed accounts for 3+ years Firms with 75% of clients invested in accountsmanaged Notional profit per owner $268,253 $481,169(+79%) $609,736(+127%) Notional profit per client $903 (+169%)$2,425 (+416%)$4,662 Practice revenue $1.2m (+75%)$2.1m (+84%)$2.2m Revenue per client $3,224 $5,621 (+65%) $9,685 (+200%) Source: Praemium Business Health: Profit Facts & Key Success Drivers Report May 2022
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The Solution
Managed Accounts 10 01 OUTCOMESPORTFOLIOCONSISTENT 06 INCREASED CLIENT REPORTING ENGAGEMENT& 02 TRANSPARENCYTECHNOLOGYENHANCED& 03 IMPROVED RISK MANAGEMENT & GOVERNANCE 04 QUICK & EXECUTIONEQUITABLE 05 MANAGEMENTINVESTMENTINSTITUTIONAL
Manager Selection
Strategic Asset Allocation
Manager Selection
Over the short term, markets are not fully efficient and are often driven by sentiment creating opportunity for active asset allocation. This process is designed to minimise downside during bad periods and participate in the upside during good periods.
Academic research shows that between 80 and 100% of longterm performance is driven by SAA. Focusing on SAA maximises the chances of meeting long term goals and objectives and refocuses conversation on overall portfolio and away from individual managers.
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Re-Focus on Asset Allocation
Strategic Asset Allocation (SAA)
Tactical / Active Asset Allocation (TAA)
Tactical Asset Allocation
Opportunity exists within the asset classes to find managers which can deliver above market returns.
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New process with Managed Account Service
We
Day 2
Current process
95 days sooner
implemented up
Timely Investment Outcomes
Day 7 to day 90 to receive, sign and documentationreturn Day 2Day
Paperwork sent to you for signing receive paperwork and submit changes is implemented on portfolio service can get best ideas to
12 Advice documentationcreated
Investmentdecisionmanager Instruction issued to Platform Investment committee decision Change is implemented on portfolio Change
Day 10 to 100 to implementseparatelychanges to each client’s portfolio
Day 3 to 21 to create advice docs for each client
New
Source: Philo Capital Advisers
• Standard 3: Finally doing nothing due to the cost of providing advice is also a conflict.
Cost of delay is significant, up to 80% of the change benefit is lost after 12 weeks of delayed implementation.
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• Standard 2: Traditional implementation requires Advisors to put the interests of some clients ahead of others creating winners and losers.
Best Interests Duty & Code of Ethics
• Standard 7: Traditional implementation does not represent value for money for the client, cost of delay means idea goes stale.
Best Interests & Cost of Delay
Portfolio
Total Market Insights Monthly 12
Asset Allocation Review Annual 1 Investment Perspectives Monthly 12
Increased Reporting & Engagement
Report Frequency Annual
Strategic
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/ TAA Updates Real Time 15 Manager Research Reviews Quarterly 4 Webinars Quarterly 4 Total 52
Reports Quarterly 4
Portfolio
Focus & Deliver
Project Plan
• Client & staff satisfaction, get more referrals and have the capacity to serve them.
• “Evolution not revolution” in terms of delivering change to existing clients.
Client Positioning
• Build an efficient and scalable communication strategy, automated via preferred CRM.
Success
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• Ensure that your partners have adequate and dedicated resources to support the transition.
• Change management support and proven execution from platform and investment partner.
StrategyCommunication
Implementation Success
• Within 6 months of transition you will already start to see the efficiency dividend.
• Utilise and leverage your investment partners reporting, understand frequency and relevance.
• Choose a partner with strong alignment in service and investment philosophy.
Alignment
• Business efficiency, reduced risk and complexity, increased valuation.
• The time to start is now, as soon as you do the project gains simplicity and momentum.
• Project plan coordinating key stakeholders across the advice practice, platform and investment manager.
• Advisor training, develop / update client presentation and role play.
“We see Drummond as an important partner to our business. They bring true investment management expertise and importantly are independent, which aligns strongly with our values as independent financial advisors”
Rodney DeGabriele, Managing Partner, Affinity Private Advisors
Client Testimonials
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“Drummond have substantially enhanced the service we provide to our clients through quality communication and impressive investment performance. We would not hesitate to recommend them to any advisory group considering managed accounts”
Brendan Murray, Managing Director, Halcyon Private Wealth
Impact
• Improved and consistent client experience
• Enhanced client communications for investment related matters – visual material and simple bullet points
• Dealer group had provided model portfolio services so they needed to develop an investment philosophy and solution
• Whilst they have a keen interest in investments, they recognise their strong advice proposition and like to partner with specialist firms across mortgage broking, estate planning and accounting, investment management was to become another important partnership.
• Just obtained own license and leaving a mid tier dealer group
• Partnered with Drummond, BT and Philo to build a white label managed discretionary account (MDA) service.
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• Ability to service an increased number of clients (Pre MDA implementation: 70/80 clients; Post implementation: 120/130 clients.
• The project team built and implemented the solution over 3 months and then Annex successfully transitioned 90% of their client base across to the service over the following 12 months.
• Richer & deeper investment conversations
Background
• The dealer group also provided paraplanning services and they had to decide if they were going to scale up in their support team or build a more efficient business model.
• Melbourne based IFA with 4 Directors/Advisors all ex CBA
Solution
• Increased staff satisfaction due to reduced stress and administration load
Case Study Annex Wealth
• Assets were spread across multiple platforms, mostly old technology. Strong desire to enhance client engagement and digital reporting.
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Annex shortlist to 2 consultants. BT / Philo assist in preparing agenda for presentationdetailedwhichiscompletedover2hours.
BT / Philo work with Annex on preparation of client brief and distribute to panel of 4 asset includingconsultantsDrummond
Investmentoperationalestablished,mandatessetupcommences
CommencesDocumentationcompletedTraining
surpass initial $100m goal in managed strategy commences
pass half way mark on
commencesAnnex
conversionAnnex
completedPortfolios
Annex Wealth – Timeline
Initial 1 hour presentation from each asset consultant hosted by BT / Philo. Drummond follow up with request for informationadditionaltoundertakedetailedanalysis.
accountBusiness growth
May ‘20 June ‘20 July ‘20 Jul ‘20 Aug ‘20 Aug ‘20 Sep ‘20 Oct ‘20 Nov ‘20 Mar ‘21 Jul ‘21 Aug ‘21
Annex Drummondappointandprojectteamassembled
go live and transition
Managed Account Training
Learn More – 12 Steps Podcast
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Drummond - Your Investment Partner
Extension of our clients business high touch, high service model – not a product on the shelf.
Alignment of Interests
What Sets Us Apart
Fee conscious and manage portfolios to a strict fee budget ensuring certainty & transparency.
Depth of buy side experience provides a complement to most wealth management approaches.
Accountability and transparency.
Experience in advice – we know what a good service proposition entails for the adviser and client
Asset allocation experts (SAA / TAA).
Supporting business with implementation of enhanced investment service.
Implementation Success
Performance
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Owned and managed by investment team who invest alongside clients.
Investment Team & Process
Existing advice partners have achieved >80% implementation ensuring efficiency dividend.
Partnership & Service Proposition
Consistent outperformance of peers.
Structured implementation process to ensure success.
Fees
Team 22 INVESTMENT TEAM Nick Reddaway Managing Partner Chief Investment Officer Melbourne 5 / 20 years Tom Schubert Managing Partner Portfolio 5MelbourneManager/17years Alex Cathcart, CFA Portfolio Manager 3Brisbane/16years Garreth Innes, CFA Portfolio 1MelbourneManager/14years Matt O’Neill, CFA 2MelbourneAnalyst/8years Vinaya Dutta Portfolio MelbourneAnalyst1/2years Jess Clifford, CFA 5MelbourneAnalyst/9years EXTERNAL ADVISORS Mark Nicholson Investment Committee Melbourne 4 / 32 years Peter Hodgson Investment Committee Melbourne 4 / 35 years Ben Kilmartin, CFA Investment Committee 5Brisbane/22years CLIENT & OPERATIONS TEAM Caitriona Wortley Head of Strategic Growth 1/Sydney18years James Noone, CIMA Regional Manager, QLD 1Brisbane/25years Chris Koh Head of Family Office Melbourne 1 / 9 years Elliott Kavanagh Operations Manager 1Melbourne/7years Harry Graham 1MelbourneAssociate/4years
FEAMI HighGrowthpeers -5.9% -9.0% -11.8% -7.1% 8.2% 3.5% Difference 1.1% 1.8% 1.4% 1.8% 0.8% 2.3%
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Month 3Month 6 Month 1Year 2Year
FEAMI Growthpeers -5.0% -7.9% -10.6% -6.5% 6.1% 2.6% Difference 1.0% 1.6% 1.5% 1.3% 0.6% 1.9%
FEAMI Flexiblepeers -3.0% -4.8% -7.4% -4.9% 3.7% 2.0% 3.0%
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Performance (June 22)
Source: Drummond Capital Partners, BT Panorama, Refinitiv;
Drummond Strategic Series
DDP -4.0% -5.5% -7.3% -4.4% 5.6% 4.0% 4.3%
Past performance is not indicative of future performance Numbers greater than 1 year are annualised. Peers represent a composite of Institutional real return funds. Inception date is 31/3/2018. The returns shown are net of fund manager fees but gross of model management fees. They are calculated from the DDP model portfolio within BT Panorama and as such may vary over time and vary by individual client.
Past performance is not indicative of future performance Numbers greater than 1 year are annualised. Peers represent a composite of Institutional real return funds. Inception date is 01/11/2019. The returns shown are net of fund manager fees but gross of model management fees. They are calculated from the model portfolios within BT Panorama and as such may vary over time and vary by individual client.
1Month 3Month 6Month 1Year 2Year 3Year Inception
DS30 Portfolio -2.3% -3.8% -5.7% -4.0% 2.7% 2.3%
FEAMI Moderatepeers -2.7% -4.8% -7.8% -6.0% 1.1% 0.2% Difference 0.3% 1.0% 2.1% 1.9% 1.6% 2.1%
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DS50 Portfolio -3.2% -4.8% -7.0% -4.3% 5.0% 3.8%
1 Inception
DS70 Portfolio -4.0% -6.2% -9.1% -5.2% 6.7% 4.5%
DS90 Portfolio -4.8% -7.2% -10.4% -5.3% 9.1% 5.8%
Difference -1.0% -0.7% 0.0% 0.5% 1.9% 1.9% 1.2%
Drummond Dynamic Portfolio
FEAMI Balancedpeers -3.7% -6.3% -8.9% -6.1% 4.0% 1.6%
Difference 0.5% 1.5% 1.9% 1.8% 1.0% 2.1%
Source: Drummond Capital Partners, BT Panorama, Refinitiv;
StrategicAsset Allocation 6.0% -0.1 -10.1% Difference -1.3% 0.6 4.0%
Past performance is not indicative of future performance. Numbers shown are since inception of the portfolios through to end May 2022. Inception date is 01/11/2019. The statistics are calculated from the model portfolios within BT Panorama and as such may vary over time and vary by individual client.
StrategicAsset Allocation 11.1% 0.2 -16.2% Difference -1.4% 0.3 3.2%
DS50Portfolio 7.4% 0.6 -10.0%
DS90Portfolio 12.5% 0.5 -17.0%
StrategicAsset Allocation 13.9% 0.3 -20.1% Difference -1.4% 0.2 3.2%
DS70Portfolio 2.45% 0.72%
StrategicAsset Allocation 8.3% 0.1 -11.5% Difference -0.9% 0.5 1.6%
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AllocationEffect SelectionEffect
Source: Drummond Capital Partners, BT Panorama, Refinitiv;
Numbers shown are since inception of the portfolios through to end May 2022. Inception date is 01/11/2019. The statistics are calculated from the model portfolios within BT Panorama and as such may vary over time and vary by individual client.
DS50Portfolio 2.18% 0.90%
DS30Portfolio 2.24% 0.95%
DS70Portfolio 9.7% 0.5 -13.0%
DS90Portfolio 2.24% 0.31%
Enhanced sources of return
Less volatility and lower drawdowns
Benefit of Active Management
01 02
Source: Drummond Capital Partners, BT Panorama, Refinitiv;
Std Dev Sharpe Max Draw
DS30Portfolio 4.7% 0.5 -6.1%
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Performance – DS70 vs Consultant SMA
Source: Drummond Capital Partners, BT Panorama,
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Our Clients Dealer Groups
Portfolio & Platform Availability 27 Strategic 30 Strategic 50 Dynamic Strategic 70 Strategic 90 Strategic 100 100 Plus EquitiesDirect BT Panorama Y Y Y Y Y Y BT Compact Y Y Y Y Y * ChoiceHUB24 Y Y Y Y Y Y * HUB24 Core Y Y Y Y Y Y * Netwealth Y Y Y Y Y Y Y * Macquarie Y Y Y Y Y * StevensMason Y Y Y Y *
• Drummond has a strong heritage in the HNW and family office segment and are uniquely positioned to support our clients with this strategy.
• Intergenerational wealth strategies
3. Webinars: Regular updates across three main categories: peer sharing, guest speakers and meet the managers
• Following the implementation of a successful managed account solution many are keen to focus on the HNW segment
2. Online Community: Virtual forum aimed at harnessing discussion and sharing insights
1. Define:
Business Consulting
productivity 3. Delegate
• Drummond investment team has extensive alternative & private market investment experience.
• Can assist our advice partners to develop their own alternative research offering or
We are passionate about helping our clients achieve their growth ambitions, “our success is your success”.
2. Refine:
Value-Added Services
Drummond Community
Private Market Opportunities & Due Diligence
HNW Advice
We have worked with our existing clients to help define their business plan and growth strategy. Business goals, client value proposition and target market Client segmentation, efficient advice delivery & : Resourcing in your business to achieve goals Scaling practice organically or via M&A What does success look like?
• Can utilise Drummond’s alternative research service providing best ideas across private equity, private debt, venture capital and property syndicates.
4. Grow:
5. Realise:
• Increasing cost to serve means advice businesses are more focused on HNW clients
1. Roundtables: Engage with peers on a range of advice related topics important to you
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• Assist with deal flow and access to institutional pricing structures
James Noone Regional Manager, enquiries@drummondcp.comSignjnoone@drummondcp.comQLDuptoourinsights:
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How To Engage With Us