HNWIs try out supermarkets

Fund supermarkets are known to target the lower end of the market, but they can also offer a valuable service to investors holding larger sums. Elizabeth Cripps reports. Contrary to popular belief, fund supermarkets do have a role to play in the high net worth individual (HNWI) market, according to Richard Forsyth, product development manager at TD Waterhouse, the global discount share brokers. “A HNW client might enjoy diversification and cheaper access and would use the service more to diversify large sums of money,” he says, despite the traditional image of fund supermarkets as being best suited to the lower end of the market. Accordingly, TD Waterhouses’s one year old European operation Internaxx markets to HNWIs on the grounds of “convenience, range of products on offer, value, web and phone dealing”, says its chief executive officer Alexander Morley. Based in Luxembourg, the Internaxx service is offered through the Bank of TDW and Banque Generale du Luxembourg (BGL). That said, Mr Forsyth prefers to draw a distinction between “self-directed” investors, who might or might not be HNW, and others, rather than specifically between HNW and mass market clients. After all, it seems reasonable that the amount of help an investor wants, and will pay for, depends not merely on whether he has E1000 or E2m to invest, but also on his level of experience, expertise and confidence in what he is doing. The TD Waterhouse philosophy is to use the top fund houses in the market, rather than to try to offer everything. The point, according to Mr Forsyth, is that customers need to know which funds are suitable to them, rather than be bewildered by a range of 4000 or so. Thus TD Waterhouse offers more than 400 unit trusts and open-ended investment companies (Oeics), from 23 of what it says are the top 30 fund houses. Investors can evaluate and select from the full range using the Morningstar fund profiler or TD Waterhouse’s own portfolio planner tool. The portfolio planner requires the user to answer a series of questions regarding investment objectives, risk tolerance, time horizon and investment experience. Access is available both over the phone and through the website. Within that, the site offers analyst-recommended funds for those investors without the time, inclination or ability to make their own selection. These give specific product recommendations under the classes UK All Companies, Europe excluding UK, Global Growth, UK Equity Income, UK Smaller Companies, North America, UK General Bonds, Japan and Asia. Then there are the Freedom Portfolios, constructed as Income, Income and Moderate Growth, Balanced Growth, Growth and Aggressive Growth. But these include only TD Waterhouse funds. Similarly, Internaxx offers funds from what it describes as “the largest and most successful names in investment management”. Its clients are UK expatriates as well as European residents and it is distinct from the TD Waterhouse UK platform, which carries only UK onshore funds. The principal of different levels of help for different investors is carried across here, but restricted to an in-house line-up which limits investors to products from BGL, TD Waterhouse and Fortis. The categories covered are money market and cash funds, bonds, European equity, country-specific European equity, US equity, UK equity, global equity, emerging markets and sector equity. The process is taken a step further with profile portfolios. These are put together as one-step investment solutions, with a minimum investment of E10,000, and provide for aggressive and balanced growth in UK sterling, US dollars and euros. These do not reflect the full range of funds available on the site, being limited again to TD Waterhouse, Fortis and BGL products. But Mr Morley, in contrast to some other platforms, stresses that Internaxx does not sell itself on customised or personalised service. Hence the “deep discount” to the initial sales charge of 2.5 per cent compared to the 5 per cent he cites as standard. In the future fund supermarkets will have the role of “a natural party of an online share-dealing service”, according to Mr Morley. But he also predicts that the market will continue to consolidate. Elizabeth Cripps is features editor at Financial Adviser magazine

Fund managers used TD Waterhouse www.tdwaterhouse.co.uk Aberdeen, Barclays Global Investors, Baring Asset Management, Deutsche Asset Management, Fidelity Investments, First State Investments, Framlington, Gartmore, Hendersons, HSBC, Invesco, JPMorgan Fleming, Jupiter, Lincoln Unit Trust Managers, M&G, Merrill Lynch, Morley Fund Management, New Star, Newton, Schroders, Standard Life Investments, TD Waterhouse, Threadneedle Internaxx www.internaxx.lu TD Waterhouse, ABN Amro Asset Management, Banque Générale du Luxembourg, Credit Suisse Asset Management, Dresdner RCM Global Investors, Fidelity Investments, Fortis, Franklin Templeton Investments, Henderson Global Investors, Invesco, Morgan Stanley, Schroders