General questions about our investment service

What is the online investment service designed to do?

This service helps you by providing just the right amount of advice to match your investment objectives to a risk level that is selected by asking you questions about your risk tolerance (your personal acceptance of risk), and your risk capacity (your financial ability to bear loss).

You will be guided through a process that gathers relevant details about your investment amounts and timeframe, and then a process to assess what risk level is right for your investment. Next, we will provide you with a comprehensive investment management proposal that outlines the investment portfolio that we are proposing to build for you based upon what we have assessed to be the right risk level for you. Naturally we will also ensure that we provide guidance on how to best use your ISA allowances at this stage.

If you wish to proceed and set up an ISA or General Investment Account (GIA) to establish your portfolio, you can do so online. At this stage we will need to ask you some personal questions about your financial situation and after investing we will provide you with a full suitability report confirming the parameters of this service and why it is right for you.

Does this service provide advice?

Yes, within this service we will make a ‘Personal Recommendation’ based on the information that you provide us, so it’s crucial that you answer all questions honestly. We go to great lengths to target your portfolio to perform within risk parameters that are right for you. This is quite different to many services on offer that provide an unadvised ‘execution only’ service.

This service offers a discretionary investment service, supported by an adviser. The automated process is designed to provide advice of a restricted nature based on restricted information provided by you, it is NOT a full advisory service. An adviser, however, is on hand to answer any questions you may have – just call us if you need help at any point.

Once you have taken the decision to invest, the investment management team makes decisions to buy and sell investments on your behalf in line with the risk grade you have selected. You do not have to give your consent for every transaction; instead, you agree that we will take responsibility for your investments when you accept our Terms and Conditions. In these terms, we promise to manage your account with skill, care and in accordance with the information you give us.

Can I speak to an adviser?

If at any stage of the process you are unsure, or need help, you can speak to an adviser for assistance.

How is this service different to other online services?

Most online services do not provide advice based upon your personal circumstances. They are known as ‘execution only’ services. You therefore carry the risk of investing in funds that do not perform within your tolerance for risk and potentially expose you to losses that you do not have the capacity to accept. Also, if you get it wrong you have no form of redress. We go to great lengths to make a suitable recommendation for you and our advice is covered under the Financial Ombudsman Service.

Do you offer an ISA?

Yes, we will ask you a number of questions and provide suggestions on how you can make best use of this year’s allowances.

Do you offer pensions?

We don't currently offer pensions.

What assets am I investing in?

The investments that sit within our portfolios may include Collective Investment Vehicles, Unit Trusts and OEICS, Fixed Interest Securities and Cash. These are non-complex investment products. We can select from any assets that we like, we're not influenced by or tied to anyone.

How can I pay money into my account?

Making your payment is easy. You can either do it online via our secure payment service or simply send us a cheque.

Is there a minimum or maximum investment?

There is no restriction on the sum you are permitted to invest, however the amount that can be allocated to an ISA cannot exceed the permitted annual limit by applying in the tax you invest. We aim to offer truly diversified portfolios. You can add more money whenever you like.

Am I locked in?

No. Investing is a long-term proposition, but you can withdraw at any time and there's no minimum investment period. We would suggest you do not invest in the stock market unless you have a timeframe of at least 3 to 5 years.

Can I invest if I'm not a UK resident?

Our services are available to UK residents only. This means as long as you are a UK resident for tax purposes you are eligible to invest with us. Unfortunately, our services are unavailable to American citizens (even those with dual nationality) due to the US government's tax reporting requirements.

Can I invest in an ethical portfolio within this service?

No, our portfolios aim to invest in the best funds available within the investment universe. If your investment decisions are driven by a particular ethic, moral or belief please contact us for advice.

What is the investment management proposal?

We are keen to ensure you understand the commitment you are making before you invest. We therefore provide a personalised investment proposal part way through the process to outline the parameters, potential volatility characteristics and expected return from your investment. You are free to print it off and read it at your leisure. This is provided free of charge.

Does the service offer an annual review?

Yes, you are free to review your portfolio online at any time, but we will remind you annually. We will check your risk level is still appropriate and suggest any changes if required. In addition we will ask you some simple questions to ensure nothing has happened in your life that would benefit from further advice.

How secure is my investment?

In order to provide advice to you and in making recommendations we undertake a thorough due diligence process. As a result of our extensive due diligence we selected Parmenion to provide the administration and investment management that supports our online advice service. Parmenion is an independent and privately owned company founded in 2007. They are backed by some of the most experienced investment and technology executives in the industry.

Parmenion do not take on clients directly, but only offer investment and administration solutions through professional wealth management and financial planning firms. Like Lucas Fettes Online, they are authorised and regulated by the Financial Conduct Authority.

All money will be held as client money in accordance with the rules of the Financial Conduct Authority, which, amongst other things, requires us to hold money in a client bank account, established with statutory trust status. All funds are segregated from Parmenion's own funds at an approved bank. Cash received in a currency other than sterling will be converted to sterling at a rate determined by us at the time. This additional process may cause a delay in crediting the account with the sterling proceeds before investment can be made.

All monies will be held with the money of other clients in a pooled account in the name of Parmenion Capital Partners LLP A/C, held as a common pool but as a ‘Client Account’. Your cash and investment are always held separately from our own accounts. In the unlikely event that Parmenion fails financially, your cash and assets will remain yours and any administration will be obliged to return them to you.

If Parmenion fails, broadly speaking, all client money held by us in client money bank accounts is pooled and is then distributed to clients on a pro-rata basis in accordance with individual client entitlements to the client money pool in general. Were there to be a shortfall in the total amount of client money held in trust accounts, held by us, you would also share in a proportion of any shortfall.

Parmenion deposits client money in general trust accounts with a UK bank. In the event of the failure of the bank(s), your share of the client money deposited with that bank, together with any personal deposits you may also have with that bank, will be covered up to the Financial Services Compensation Scheme limit (currently the sterling equivalent of €100,000 per depositor).

Financial services compensation scheme

As an authorised firm, Parmenion pays towards the UK's Financial Services Compensation Scheme. This is in place to protect private individuals against losses from the failure of an authorised business. Full details are available at www.fscs.org.uk.

Regulatory protection

The UK's Financial Conduct Authority has detailed rules for the handling and overseeing of client assets and money and requires extensive pre-recruitment and ongoing checks on, and the registration of, individuals involved in this area of our business. The Financial Conduct Authority’s rules place personal responsibility on such approved persons to ensure compliance with client asset rules and a range of sanctions exist which act as a deterrent to the misuse or careless handling of client assets.

Further information about the protection afforded you can be found at www.fca.org.uk.

Is investing right for you?

If you want to see if investing is right for you, we can help. And if it is, we can recommend a portfolio that meets your specific needs based on the information you provide. As a customer, you generally only choose to take risk when you believe you will be rewarded for doing so.

Investing is no different. When you decide to invest, your target return is the financial reward you hope to achieve for accepting investment risk. Our focus is firstly determining whether you should invest and then getting the best investment outcome for you in relation to the level of risk you're willing and able to take. The approach is based on strategic asset allocation – defining and fixing portfolio asset allocations (which might include Cash, Bonds, Property, Equities and alternative assets such as Commodities) from the outset, based on historical performance data.

After establishing a strategic asset allocation, it won’t deviate from the determined asset weights. This strategy follows the principles of Modern Portfolio Theory: a pioneering work that saw Harry Markowitz win a Nobel Prize in 1990 (watch our short video to find out more). Ours is a passive service – we eliminate specific risks by investing each asset class in a portfolio to match, as closely as possible, the movements of a particular index. This also reduces the cost as it removes the need to pay for fund managers.

Many online services are offered as a non-advised, ‘execution only’ service – they provide you with information and tools but the decisions over how and where you invest are yours.Our service will take information you provide and formulate a specific recommendation for you, including an investment portfolio if appropriate. If you want an investment portfolio designed around your personal circumstances by financial experts who will take responsibility for managing it, our service is suitable for you.

How your investment will be managed

Why is risk so important?

Nothing in life is without risk. We choose to take additional risk only if we believe we will be rewarded for doing so. Investing is no different. Your target investment return is the financial reward you hope to achieve for accepting a degree of investment risk. Sadly, it is a fact of life that if you want high returns you will need to accept a greater risk of loss. So by understanding how much risk you have the tolerance and capacity to accept, we can build a portfolio that targets the maximum return for you.

What is investment risk?

Put simply, investment risk is a measure of how much uncertainty there is about the return an investment may deliver. The more risk you take, the wider the range of potential outcomes. Taking additional risk can therefore lead to higher or lower actual returns than you would otherwise have achieved. Your ability and willingness to accept risk will determine the range of assets suitable for your investment. Understanding the risk associated with your investments is crucial. If you are not comfortable with – or do not understand – the risk you’re taking, you should not invest.

Is there such a thing as a safe investment?

Inflation risk is a hidden threat to any investment, and while you could be lulled into a false sense of security as your bank balance quietly accrues interest, there’s a possibility that in ‘real’ terms you could be losing money. That’s because the rising cost of living means £100 will buy you less in ten years’ time than it does today. So, for your investments to be truly safe, you need to make sure they’re earning more than the rate of inflation.

How will you manage risk within my portfolio?

There are techniques to manage risk. The most common is asset allocation, or diversification, as it is sometimes referred to.

This involves investing in different types of investments so that different parts of your portfolio react differently to market-moving events. This reduces the negative impact of the worst performing asset classes. As with all things, this benefit comes at a cost – it also reduces the positive impact from the best performing asset classes.

Deciding which assets are right for you can be challenging because the investment universe is vast.

How will you build my portfolio?

We use respected academic theory to build portfolios tailored to investors’ requirements. These solutions provide what we feel is the optimum mix of assets to deliver the highest possible return for the level of risk you are willing and able to accept.

How will you manage my portfolio on an ongoing basis?

Each month our investment managers review each of the underlying funds in their investment universe to assess their suitability for continued inclusion within your portfolio. Where a fund is no longer meeting our criteria, we will replace it with one more suitable.

In addition we will periodically rebalance your portfolio to ensure it remains true to your risk profile throughout the year.

Can I change my risk level or investment amounts?

If your situation or your goals change you can conduct a review online at any time. We recommend that you do this at least annually in any event as this will allow you to alter the level of risk your funds are exposed to or the amount of money you contribute to them. You have complete control over how much money you have invested with us. We will reconfirm our understanding of the changes in your circumstances, and, if appropriate, suggest changes in your risk grade dependent on your changing circumstances, to keep your investments on track with your risk level.

What information will be provided to me about my investments?

We will provide you with a full asset valuation of all investments held on your behalf on an annual basis. In addition to this we will also send a statement of your holdings every 6 months, detailing your holdings and any cash balances held on your account (you can ask us to provide it more frequently than this). Online access to your account is also available, through which you can obtain online valuations at any time 24 hours a day, 7 days a week. Parmenion do not issue contract notes for individual underlying trades, these will be detailed on your six monthly valuation.

ISA and GIA accounts

What is an ISA?

Every year the government gives you a tax-free allowance in the form of an Individual Savings Account (ISA). There are two main sorts of ISA – a Cash ISA and a Stocks and Shares ISA. Our online investment service offers only Stocks and Shares ISAs. An individual can only contribute money to one Stocks and Shares ISA and one Cash ISA in each tax year. If the investments held within your ISA make a profit, you are exempt from capital gains tax. You also receive preferential tax treatment on dividends and interest.

What is a GIA?

A General Investment Account or GIA is an account that we set up to hold investments that are not held in an ISA. Unlike an ISA it does not attract favourable tax treatment.

Who can open an ISA?

For a Stocks and Shares ISA: You must be 18 years or older. You must be a UK resident for tax purposes.

How much can I invest in an ISA?

The amount you can invest in an ISA is set by the government every year; in the current tax year, which runs from 6th April 2014 to 5th April 2015, you can put up to £15,000 in your ISA. You can put the whole allowance into either a Stocks and Shares ISA or a Cash ISA. Alternatively you can split your £15,000 allowance between a Stocks and Shares ISA and a Cash ISA in any proportion you wish. So, even if you have a Cash ISA elsewhere, you can still open a Stocks and Shares ISA with us. You can, of course, invest more than the ISA allowance in your account. However, any investments outside the ISA allowance will not be sheltered from tax. Please bear in mind that a Stocks and Shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please speak to an adviser.

How can I manage my ISA allowance within this service?

We will take you through a set of questions that will allow you to:

  • Put your full ISA allowance into your Stocks and Shares ISA with this service
  • Put some in a Cash ISA elsewhere and put the rest in your Stocks and Shares ISA with this service

Any excess contributions will be invested in our General Investment Accounts.

Can I transfer existing assets into this service?

We are happy to accept transfers into the service (such as transfer of an existing ISA). Due to the limitations of this being an online advice process we are NOT able to make recommendations on which assets you should sell or transfer. This will be solely down to your discretion. If you are unsure, please contact one of our advisers, who will be able to help you.

If I transfer existing assets into this service, will I still keep my ISA wrapper?

Yes. Any ISA transfers will continue to be sheltered from tax.

What is the situation regarding tax?

Whilst every care has been taken to ensure that you are provided with the most suitable tax efficient way of investing (such as ensuring your ISA allowance for the current tax year is fully utilised), it is important to note that the we do not take into account your personal taxation position or any capital gains tax liabilities or allowances you may have. It’s also important to note that, as this is a discretionary managed service, all transactions undertaken on your behalf to maintain the volatility and return characteristics of your portfolio are carried out without prior reference to you; and personal taxation situations are NOT taken into account when making purchases and disposals within your portfolio, which could give rise to capital gains.

Withdrawing your money

How easy is it to cancel or close my account?

You can close your account and withdraw money whenever you decide. Please remember, however, that you may not get back the full amount you invested.

Can I withdraw my money?

It’s your money, and you can request all or part of it back at any time. Withdrawals are free.  After we close your account, we hold your personal information for a time as required by law. You should always remember, however, that the value of investments can go down as well as up and consequently it may not always be possible to receive back the full amount originally invested. The sum available to you in the event of surrendering your investment will be dictated by value of the underlying assets making up your portfolio at the time we process your instruction to surrender.

Can I take an income from my investment?

Yes, you may at any time set up an income from your investment. This may be in the form of a natural income yield from your portfolio or a fixed amount at regular intervals.

Can I withdraw from an ISA?

You can take money out of your ISA whenever you want. You should remember, however, that when you withdraw money from your ISA, part of the allowance remains used. This means, for example, that if you reach the ISA limit and then make a withdrawal, the money cannot be put back in.

Fees

What does it cost?

Our charge for this service is made up of 2 elements:

  • An initial charge for the service you receive when establishing your plan; and
  • An ongoing charge to ensure your portfolio remains on track in future

The charges are as follows:

Initial charge: 1.5%

Ongoing charge: No more than 1% unless you select risk grade 1, in which case it will be 1.09%

The exact charges will depend on your investment amount. These will be given in your personalised investment management proposal and agreed online before you invest. Once you have agreed these charges they will be shown on your application.

Other costs may be applied by the underlying fund managers such as a Dilution Levy or additional initial charges, on an ad-hoc basis. These are infrequent but may be applied from time to time to stem inflows/outflows and stop liquidity issues.

We always endeavour to purchase funds at the lowest possible price on your behalf; you will never pay more for a fund through us than you would if you were to go to the fund provider directly. Where we receive any form of rebate from a fund manager we will credit the payment in its entirety to your cash account, less any tax that may be payable.

Doing it yourself

Could I do what this service does by myself?

You could replicate our portfolios on your own, but rebalancing and monitoring your portfolio requires time and expertise. Furthermore, as we place ‘bulk deals’ through our nominee account, our costs are lower than you could obtain yourself.

Hopefully we’ve answered your question. If not, please contact us.