If an investor is unhappy with their current financial advisor or if their portfolio is underperforming, there is a common misconception that, in order to transfer their assets to a new manager, they will have to liquidate their investments and, as a result, crystalise any losses. However, Mark Richmond-Watson from James Hambro assures that usually, this is not the case: “There are many benefits to transferring ‘in specie’ while avoiding unnecessary costs and retaining market exposure during the transition”

When investors feel that their portfolio has underperformed, or they are unhappy with the service that they receive, an urge to reverse the situation takes over. However, many investors believe that taking action at a time when the market is volatile can lead to negative results. Subsequently, they sit still, waiting for the negative moment to pass. Rather than accepting that there’s nothing to be done, consider it as an opportunity: perhaps it is time to look for a new wealth manager, one that can bring those expected returns, or offer the service that investors require.

However, the common belief is that transferring your funds and assets to a new investment manager would mean having to liquidate them first to later transfer them in cash. If you then have to liquidate when their value is already down, the sense of loss becomes even greater. “There’s a misunderstanding that clients have to liquidate their portfolio before transferring it to a new manager” warns Mark Richmond-Watson, Portfolio Manager at James Hambro & Partners. “The majority of portfolios can be transferred in specie, which just means that people can hold exactly what they do hold currently and transfer it to a new wealth manager”. 'In specie' is a Latin term meaning 'in the actual form', which here translates to the transfer of ownership of that asset from one person/company/entity to another person/company/entity without the need to convert the asset to cash.

Can all assets and funds be transferred in specie?

Mark reminds us that this is possible, and often more advantageous than. Still, there are some exceptions, like when a wealth manager has a preferential fee rate with a certain fund. On the other hand, that can be mitigated typically by converting into a more widely held institutional share class. "You may not be able to transfer that fund share class out, if it has a preferential fee, but you may be able to convert it into a widely held share class, with the added benefit of the conversion not being a taxable event". This certain fund Mark mentions can be a closely-held stock, meaning a company's common shares that are predominantly owned by one individual owner or by a group of stockholders, whereas in a widely held stock, thousands or even millions of different investors may own shares in a large company.

According to Mark, the most common example where transferring out in specie is impossible is if you own an in-house fund, which a Bank or Financial Entity created solely for their clients. In most cases, that still won’t be the entirety of the portfolio. “Typically, in-house funds are not always the best in class when compared to the wider peer group, so selling those funds to be able to transfer may well not be detrimental in a lot of the cases”. There are often benefits to wealth managers when keeping clients in their in-house funds: potential double charges, performance fee charges on a fund that isn’t a best performer or consistently outperforming .“It would be very unusual for a client’s portfolio to just have in-house funds, usually they represent a small percentage of the entire portfolio. Transferring in specie could still be possible for a significant proportion of the investment portfolio” Mark reminds us.

What are the benefits of transferring a portfolio?

If you decide to transfer in specie, the new wealth manager can set new goals and rearrange the portfolio to meet your financial objectives. “James Hambro’s approach would be to gradually reorganise the portfolio to ensure that it is fit for purpose given today's outlook going forward rather than looking back at history” underlines Mark.

The biggest “highlight” of transferring without liquidating is not missing out on market moves, eliminating market timing risks which are impossible to predict. It allows clients to move managers without crystalizing losses while still being exposed to positive market moves. Mark insists this is the best option for many clients: “It is refuting this belief that you can’t transfer out in specie, you can do it. This should be very simple, and the vast majority of the funds should be transferred without problems”.

What are the risks for transferring in specie?

Transferring in-specie might come with some charges, say £25 or £50 per line of stock, or there could be charges from your current wealth manager to transfer out in-specie. Charges vary and, indeed, not all managers charge it. “You could argue it with them” encourages Mark, “it can be a strategy to protect themselves, to make the transfer more difficult”.

Looking at the big picture, these charges will be relatively small: as an example, a portfolio of 40 holdings worth £1 million could incur a transfer fee of £500. “While this is something we’d rather not pay, a positive movement of 0.05% would instantly recover this transfer cost”.

Another aspect to consider is that any in-specie asset transfers must be done at current market value, which could have an impact on your contribution caps and tax position.

The other cost is not financial but in time. It can take longer to transfer in-specie than transfer cash because you have to re-register the stock under the new manager or custodian. Roughly, and depending on the type of investment to be transferred, an in-specie transfer usually takes a couple of weeks. “The benefit is you are still in the market, you don’t miss out on any potential moves whilst you are transferring” Mark reminds us, and underlines that this extra time is an opportunity for the new manager to re-organise the portfolio without having to rush through the process. “I would say the benefits far outweigh the costs of doing so”.

In any case, if you are unhappy with how your portfolio is performing, talking to a new wealth manager to weigh up different options should not be complicated or bring with it costly hurdles. It can offer you piece of mind and the ability to make balanced judgements without commitment to selling assets.

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Transferring assets to a new wealth manager: “There’s no need to liquidate a portfolio to transfer out”

Mark joined JH&P in 2011, focusing on private clients and co-head of funds research. He has completed the Investment Management Certificate and the CISI Diploma in Private Client Investment Advice and Management. 

He is also a member of the Chartered Institute for Securities and Investment. In 2014, 2015 and 2017, he was named in the Citywire Wealth Manager ‘Top 30 Under 30’ list of investment managers. Mark enjoys working in a highly motivated team in a role which provides a balance between stock and fund analysis and client engagement. He takes pride in working closely with clients to understand their financial situation and constructing portfolios to meet their needs. 

He is hugely satisfied by building strong relationships with clients over many years and sometimes decades. Winston Churchill’s quote inspires Mark, “A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty”. 

Portfolio Manager

Mark Richmond-Watson

For over a decade, JH&P has been setting the benchmark for wealth management. With outstanding year-on-year returns and numerous awards since its inception, they are determined to continue to offer a service that is built on the foundations of expertise and belonging. At JH&P you will benefit from a team that has been encouraged to go above and beyond for you. With an extraordinary low turnover of clients and in excess of £7bn of assets under management, JH&P are still building a business that they are proud will stand for generations and lead to something special for you and your family. 

JH&P aim is to work with their clients to take a complex subject and make it comprehensible so that informed and well-considered decisions can be made with confidence, so that the overall finances of the family are protected for generations to come. JH&P build strategies to balance long-term ambitions with short-term needs. Their core principle is that financial planning should give clients the tools to comprehend the incomprehensible.

They work proactively with key client advisers to ensure a coordinated approach is taken to tax, structuring and other matters where teamwork is likely to lead to better client outcomes. Their framework captures all areas of wealth planning which include tax efficiency, cash flow analysis, risk management, protection and eventually passing on wealth.

Where appropriate, JH&P draw upon the expertise of its panel of specialist advisers to provide complementary services; from specialist tax, legal to mortgage advice. Once a strategy has been developed, they build a structure which is at all times underpinned by their rigorous investment process. 

It's an undeniable fact that the growth of your assets is the most important objective of investment management. Every wealth manager will share that belief, but what makes JH&P special is how they achieve that goal.

They put a strong emphasis on the delivery of liquidity and managing risk at both a security and portfolio level as they know this is the best way to ensure consistent returns no matter the market permutations. To achieve this, they create diversified, multi-asset portfolios, all of which have a core allocation to global equities. Over the years, global-quoted equities have historically delivered positive real returns through multiple market cycles, however they are not afraid to look to find other ways of making your wealth grow. 

Other asset classes such as fixed income, infrastructure and absolute-return funds allow them to diversify risk and optimise your portfolio, as well as to provide additional sources of income. 

Every investment is associated with some risk, but you can rest assured that JH&P's investment philosophy is one with security and liquidity considerations at the fore. Their approach is underpinned by thorough bottom-up due diligence - they invest the client's portfolios only in markets and asset classes that they fully understand and believe will deliver a strong, risk-adjusted long-term returns. 

James Hambro & Partners

Rosie joined JH&P in 2013, previously working at HSBC Investments and UBS Wealth Management. Rosie looks after direct client relationships, manages portfolios, and has responsibilities in investment research. She is also a member of the asset allocation committee and the stock & fund selection committees. Rosie is also a CFA Charterholder, member of the Chartered Institute for Securities & Investments, she was recommended in Spears 2022 Wealth Managers and a panellist at industry events, including Jersey Finance.

Partner and Portfolio Manager

Mark joined JH&P in 2011, focusing on private clients and co-head of funds research. He has completed the Investment Management Certificate and the CISI Diploma in Private Client Investment Advice and Management. He is also a member of the Chartered Institute for Securities and Investment. In 2014, 2015 and 2017, he was named in the Citywire Wealth Manager ‘Top 30 Under 30’ list of investment managers.

Mark Richmond-Watson

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Mark Richmond-Watson

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Articles from author

Transferring assets to a new wealth manager: “There’s no need to liquidate a portfolio to transfer out”

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