How much does a SIPP cost with SCM Direct?
There is no initial fee. The ongoing fee is 0.1%+VAT subject to a minimum annual charge of £15+VAT and a maximum annual charge of £50+VAT. Ongoing fees are calculated using BPS (Basis points) where 100 BPS is the equivalent to 1%. There are no additional charges for transfers in and the fee for transfers out will not exceed the previous year’s fee. An additional fee of £125 +VAT applies to any SIPP that is in drawdown. Other fees for work in relation to for commercial property, divorce & death for example are available on request and will be quoted to you before any work is carried out. Please note there will additional fees for holdings on the SCM Direct platform. Details can be found on scmdirect.wpengine.com.
Which ETF providers do you use to invest?
SCM Direct only invest in UCITS IV ETFs for its GBP portfolios.
In all portfolios, we NEVER invest in any ETF that is either leveraged (i.e. which aim to magnify the movements in markets through borrowing) or inverse/short ETFs (that aim to make money when the benchmark being tracked falls in value).
SCM Direct is not biased towards any one ETF provider. We seek out ‘best of breed’ for all the ETFs we select for our portfolios.
What is the difference between an SCM discretionary portfolio and a mutual fund?
One of the main differences is that in a discretionary portfolio the holdings are all held in your name, rather than through holding units as happens in a mutual fund.
Investors can go on-line at any time and see the full breakdown of holdings within their account, as well as the actual values of the various holdings as at last night’s closing values.
It should be noted that there are tax differences between holding a discretionary portfolio and holding units in a fund and you may wish to get specialist tax advice before investing. For those investors not investing via an ISA or SIPP we will provide an annual statement of capital gains and income for clients to enter on their annual tax return.
Will I have an electronic record of any correspondence or documents that I have previously received?
Within the website you will have the ability to view and print electronic copies of correspondence we have sent you.
These can be located via your existing log in under the ‘Documents’ Section.
When instructing to withdraw a cash amount, can I choose which specific ETFs to sell?
No. We will sell the various holdings within your portfolio pro-rata in order to ensure that your remaining portfolio follows the strategy and asset allocation of the particular portfolio in which you are invested.
Why Are There No Questions on Attitude to Risk?
We believe most of these risk questionnaire tools to be pure nonsense as they are mechanically generated. It is our view that they either give misleading outcomes or simply classify everyone as being in the middle, balanced. Fundamentally, such analysis requires face-to-face contact and discussion to gauge individual nuances, which no automated decision tool can ever detect.
For these reasons we are sceptical of any company operating automated guidance, which then go on to tell you which particular fund or strategy to follow.
When do you normally trade and when will my money be invested?
Portfolio asset allocation or other changes may take place on any day as we seek to retain full flexibility to take advantage of exceptional opportunities.
Monies will normally be invested within one day of cash clearing.
What makes SCM Direct different from other wealth managers/online platforms?
We believe our 100% transparency on fees and holdings, common sense approach to everything we do, the founders’ alignment with clients by being invested in all the portfolios on exactly the same fees and terms, and track record combine to set us apart.
Our levels of highly liquid and highly diversified portfolios at a very attractive cost are add to our individuality as modern investment managers. The company is 100% owned by the founders and as one of the largest clients within the SCM portfolios they do not have many of the conflicts of interest that are infect so many financial organisations.
SCM does not ‘flog’ anything and we are not ‘traders’ so we do not make extra revenues or take cuts from any of our activities.
What is your record personally and for similar portfolios?
This is all detailed within the track record section of the site (Link).
What is the academic or other research supporting your strategy and philosophy?
Many expert research papers and commentaries over several decades have come to the conclusion that statistically it is almost impossible for traditional active management to outperform the markets.
Time and time again they have found that:
- costs matter
- diversification is vital
- index funds tend to beat more concentrated ‘active’ funds
- investing based on fundamentals on a long term basis tends to beat attempts to ‘time’ the markets
- over trading tends to produce disappointing outcomes.
When looking at research from traditional active fund managers or trade bodies often aimed at discrediting such conclusions, you should always remember that the academics strive to draw conclusions from data that is selected objectively, rather than the fund manager or trade body that tends to start with a conclusion and work backwards to find selective data to prove it.
What happens to any income received from dividends and interest on cash balances?
There are two forms of ETF with regards to dividends; accumulating and distributing funds.
Accumulating funds roll any dividends up inside the ETF so the price of the ETF reflects a total return.
Distributing funds pay dividends out to investors at regular intervals (monthly, quarterly, semi-annual or annual).
Where dividends are paid out to investors, this additional income is paid into the cash component of the portfolio and reinvested into the portfolio.
What happens if I want to add more money or withdraw money or change portfolio?
In order to make withdrawals from your account/s, subject to the minimum daily withdrawal of £5,000 (or the equivalent in USD or EUR if investing in a USD or EUR portfolio) and the relevant minimum balances being kept within the account, please give us details of your request via a secure message.
In order to change the portfolio in which you are invested please send an email to email@example.com
What financial security do I have? Where are my investments kept? Who is the custodian?
No client money is held by SCM Direct. We are not allowed to hold any client monies whatsoever. Hubwise Securities Limited holds it prior to the money being invested on the next dealing date.
Hubwise Securities Limited, as part of the custodial relationship with all SCM Direct clients, are responsible for holding all assets (including ETFs) on your behalf.
Hubwise Securities Limited is authorised and regulated by the Financial Conduct Authority- Registration Number 502619. They have permissions to hold client money and to safeguard and administer (provide custody for) assets for professional and retail customers.
All client cash is held in client bank accounts (Client Accounts) with FCA authorised UK Banks, Building Societies or other institutions. Hubwise may choose from these but currently use Bank of Scotland, NatWest Bank and Barclays Bank.
Client bank accounts are designated as trust accounts and are segregated from Hubwise’s own monies. They may include the balances of other clients but are operated and administered in accordance with FCA CASS (Client Money) Rules.
If one of those Banks fails or becomes insolvent the client may be entitled to claim compensation under the FSCS up to £75,000 of any loss. The level of compensation will be reduced if the client already holds an account with the Bank
Hubwise is responsible for the safe custody of all assets held in Client Accounts. Such investments are registered in the name of a nominee company which will normally be Hubwise’s wholly owned subsidiary Hubwise Nominees Limited. Occasionally, as may be required for certain customers and certain asset classes, another nominee company may be selected in accordance with the FCA rules and with the agreement of the introducing intermediary. Hubwise Nominees Limited is a non-trading “dormant” company set up to hold investments on behalf of Investors.
Hubwise are responsible and liable for its nominee to the same extent as for its own acts including for the avoidance of doubt, losses arising from fraud, wilful default or negligence. Investors’ investments will be registered in the same name as those of other investors (pooled together with other investor investments).
Hubwise have insurance in place for Professional Indemnity and Crime as well as an agreement between Securities and Nominees to further strengthen asset security. The FSCS also provides compensation of up to £50,000 per investor for eligible claimants in respect of UK Securities and Funds held in custody. Hubwise has never had a FCA action or investigation taken or carried out against it or its employees since incorporation.
Hubwise Securities Limited is authorised by the FCA as a BIPRU €125k limited licence firm and, as the only regulated company within the group, is the only group entity subject to the ICAAP process. Hubwise Securities Limited has no trading-book exposure as it acts only as agent in order to place aggregated deals with Fund Managers for collective investments and market counter-parties to place deals in securities. Hubwise Securities Limited does not provide investment advice or deal as principal at any time.
What does SCM Direct NOT provide?
SCM Direct does not provide any financial advice whatsoever or offer sole investment products outside the portfolios described on our website. Our provision of model portfolios does
not involve us considering the investment requirements of individual clients. We manage the model portfolios according to the stated objectives of the portfolio(s) and within the various parameters detailed within our Terms and Conditions. If you are unsure of the suitability of any investment contained in this website, please contact an independent financial adviser.
SCM Direct also does not hold any client monies or any assets whatsoever. Hubwise Securities Limited, as part of the custodial relationship with all SCM Direct clients, are responsible for holding all assets (including the ETFs) on your behalf.
What are the tax implications of investing with SCM Direct and will I receive tax statements?
The tax implications will vary according to your own personal financial circumstances. If you want any further guidance you should speak to an Accountant or independent financial adviser.
Annual UK tax packs will be produced for clients at the end of each tax year and will be via the secure client online account showing the annual income and capital gains for each portfolio.
What are the SCM Direct portfolio choices?
We have 3 core portfolios and 3 blended portfolios that are available in 3 currencies.
The GBP portfolios are also available via a NISA or SIPP ‘wrapper’.
The 3 core portfolios are:
- SCM Bond Reserve
- SCM Absolute Return
- SCM Long-Term Return
3 blended portfolios made up of a 50/50 allocation of two of the three core portfolios, which are rebalanced subject to relevant parameters on a weekly basis:
- 50/50 Bond Reserve/Absolute Return
- 50/50 Bond Reserve/Long-Term Return
- 50/50 Absolute Return/Long-Term Return
The 3 core portfolios and 3 blended portfolios are available in 3 currencies – £, US$ or €
The minimum investment levels are:
- For direct clients our minimum investment level is £10,000 investing in one of our GBP portfolios.
If you are either outside the UK or do not have a UK bank or building society account, the minimum is £100,000.
- $100,000 if investing in one of the USD $ portfolios
- €100,000 if investing in one of the EUR € portfolios
3 ways to invest
- Direct into the portfolios without a tax efficient wrapper
- Via an Individual Savings Account – ISA
- Via a Self-Invested Personal Pension – SIPP Account (Via Hubwise Securities Ltd)
What are the principal fees and how are they charged?
Unlike many of our competitors, we believe in showing all the costs including the hidden dealing related costs and then add these costs together.
ANNUAL MANAGEMENT CHARGE: 0.4% + VAT 0.48% p.a.
Typical Underlying ETF cost 0.29% p.a.
Typical Trading costs 0.09% p.a.
Custody & Administration Fee 0.12% p.a.
Typical TOTAL COST of INVESTING 0.98% p.a.
You can find the full fee disclosure on our latest monthly factsheet (Link).
What are the main advantages and disadvantages of SCM’s investment approach?
The main advantage is that it is highly unlikely we will be bottom as our high levels of diversification, both of assets and securities, will often reduce the highs and lows of more traditional, concentrated funds. We believe that our approach of greater diversification, less costs and a focus on fundamentals are the best tools to ensure long term success.
SCM Direct believes that successful asset allocation relies on a common sense contrarian approach combined with the application of old fashioned fundamental investment valuation yardsticks e.g. price/earnings, yield, price/book, price/cash flow.
SCM Direct endeavors to invest in markets when they are most out of favor and under-valued in order to reduce the risk of being invested in the latest investment bubble or fund manager fad. Successful asset allocation often relies on being contrarian rather than blindly following the herd of investment professionals.
Concentrating on building these actively managed portfolios through the use of ETFs allows SCM Direct a wide choice of asset classes combined with very low transactional and fund management costs compared with most traditionally managed active funds.
The main disadvantage is that we will almost certainly never be top of any table in terms of performance. Another disadvantage is that our approach is extremely unlikely to help anyone ‘get rich quick’ as broad market indexes tend to move up or down less than many individual securities.
Please remember that each person’s tax situation is unique, that ISAs may not be the most tax efficient approach for everyone, and that tax legislation can change in the future. If you are unsure if an investment is right for you, please contact an independent financial adviser.
What are the benchmarks used across the portfolios?
Each SCM Direct Portfolio has its own comparative benchmark.
We believe that many investors are looking for their portfolios to either outperform cash or the inflation rate, so we have used these as our benchmarks.
Bond Reserve Portfolio GBP LIBOR GBP Total Return 1 Month
50/50 Bond Reserve / Absolute Return GBP – LIBOR GBP Total Return 1 Month
50/50 Bond Reserve / Long-Term Return GBP – Average of LIBOR GBP Total Return 1 Month & UK RPI All Items Index
Absolute Return Portfolio GBP – LIBOR GBP Total Return 1 Month
50/50 Absolute Return / Long-Term Return GBP – Average of LIBOR GBP Total Return 1 Month & UK RPI All Items Index
Long-Term Return Portfolio GBP – UK RPI All Items Index
Bond Reserve Portfolio USD – LIBOR USD Total Return 1 Month
50/50 Bond Reserve / Absolute Return USD – LIBOR USD Total Return 1 Month
50/50 Bond Reserve / Long-Term Return USD – Average of LIBOR USD Total Return 1 Month & US CPI Urban Consumers NSA
Absolute Return Portfolio USD – LIBOR USD Total Return 1 Month
50/50 Absolute Return / Long-Term Return USD – Average of LIBOR USD Total Return 1 Month & US CPI Urban Consumers NSA
Long-Term Return Portfolio USD – US CPI Urban Consumers NSA
Bond Reserve Portfolio EUR – LIBOR EUR Total Return 1 Month
50/50 Bond Reserve / Absolute Return EUR – LIBOR EUR Total Return 1 Month
50/50 Bond Reserve / Long-Term Return EUR – Average of LIBOR EUR Total Return 1 Month & Eurozone CPI
Absolute Return Portfolio EUR – LIBOR EUR Total Return 1 Month
50/50 Absolute Return / Long-Term Return EUR – Average of LIBOR EUR Total Return 1 Month & Eurozone CPI
Long-Term Return Portfolio EUR – Eurozone CPI
What are ETFs and what’s the difference between an ETF and a traditional mutual fund?
ETF stands for Exchange Traded Fund. These products trade throughout the business day on stock exchanges like individual company shares. The ETFs within the GBP portfolios are all UCITS IV regulated thereby providing investors with a high level of regulatory protection.
ETFs track the performance of their benchmark index, thus the performance of a FTSE 100 ETF for example, will normally closely follow the performance of the underlying FTSE 100 benchmark index, less its fees. In contrast, a mutual (non-index) fund often invests in a much more concentrated range of securities resulting in its performance often being markedly different (either positively or negatively) to its benchmark.
The main advantages of ETFs over many traditional ‘active’ mutual funds is that they can be traded on a stock exchange throughout the business day rather than just once a day, they tend to charge significantly lower fees, trade their underlying holdings much less thereby saving trading costs, tend to be much more diversified and are normally much more transparent as they normally disclose all their holdings daily.
An excellent guide can be found at the London Stock Exchange ETF Guide