Master Adviser Brodie launches trust-based Chancery Lane for retirement income

Chartered financial planner Doug Brodie assembles crack squad of financial, technology and retail directors, including Nutmeg ‘robo adviser' co-founder William Todd, for new investment trust focused pension income service.

Chartered financial planner Doug Brodie (pictured) has taken his love of investment trusts to a new level with the launch of Chancery Lane, a retirement income advisory service that will invest solely in ‘dividend champion’ closed-end funds listed on the London Stock Exchange.

Brodie, the founder and managing director of Master Adviser in London’s Chancery Lane, who impressed our viewers with his knowledge of trusts and pensions in a Dividend Crisis broadcast in May, has secured the backing of a handful of experienced financial, technology and retail heavyweights for his new venture.

These include William Todd, co-founder of Nutmeg, the UK’s biggest ‘robo adviser’, who left the now Goldman Sachs-backed firm in 2016.

Todd (pictured below) joins Chancery Lane Income Planners as a non-executive director with Bridget McIntyre, former UK chief executive of insurer RSA; Kim Lerche-Thomsen, ex-boss of Prudential Annuities; Steven Sharp, former executive marketing director at Marks & Spencer; and Ian Manning, an IT consultant who worked at the Swiss CERN large hadron collider experiment set up to search for the Higgs boson ‘god particle’.

Brodie hopes the strong board will help make Chancery Lane as successful as Personal Capital, the leading US retirement income specialist founded by Bill Harris, who he wishes to emulate.

He declined to say how much the five non-execs - who are all shareholders - had put in to his company though as a seed enterprise investment scheme (SEIS) the maximum it can raise is £5m.

Brodie’s devotion to investment trusts is unusual, but not unique, among UK financial advisers. After the 2008 financial crash when Bank of England ‘quantitative easing’ stimulus policies decimated bond yields, Brodie turned to trusts as the foundation for growing his clients’ portfolios at Master Adviser.

With Chancery Lane, Brodie hopes to go a step further and make it the UK’s number one ‘virtual’ retirement income planner exploiting the dividend strengths of London-listed closed-end funds.

In a world of near-zero interest rates in which traditional annuities have been all but wiped out by the 2015 ‘pension freedom’ reforms, Brodie believes the ability of trusts to pay dividends from accumulated revenue and capital reserves makes them invaluable to retirees.

‘While the UK financial services landscape is awash with organisations of varying kinds seeking to assist retail consumers with pre-retirement planning during the “accumulation” phase, few if any firms have pursued an unalloyed focus on the ultimate objective of that accumulation, ie, the generation of a reliable, rising and inflation-beating post-retirement income in the “decumulation” phase,’ explained Brodie.

‘We have two actuaries and a mathematical physicist in our research team developing algorithms that identify long-term income streams, initially from investment trusts,’ he added.

Chancery Lane’s launch comes at a crucial time for investment trusts and income investors. Investment trusts’ ability to smooth dividend payments and establish remarkably long track records of rising payouts, such as the 54 years achieved by City of London (CTY ), has made them popular with DIY Sipp holders taking advantage of former chancellor George Osborne’s pension liberation.

However, this year’s Dividend Crisis provoked by the coronavirus pandemic has posed a severe challenge to what the Association of Investment Companies has dubbed their ‘Dividend Heroes’. Temple Bar (TMPL ), a well-known UK equity income trust, was this month forced to say it would abandon its 35-year record and cut its dividend as its new managers from RWC took stock of the plummeting investment income produced by the portfolio of cheap, ‘value’ stocks.

Brodie believed investors should not be discouraged, however, pointing to recent signs that companies were beginning to reinstate dividends after suspensions and cuts this year.

He also argued that modern portfolio theory and Monte Carlo forecasts beloved by professional pension fund managers and insurance companies had little relevance to individual pensioners, who he said could stomach volatile investment trust share prices if they could lock in to long-running dividend streams.

While future prospects were highly us pncertain, his analysis suggested that F&C (FCIT ), for example, the UK’s oldest investment trust founded 152 years, that has grown dividends for 49 years, probably had sufficient reserves to make payouts for another 3.8 years even if the dividend crisis extended beyond 2020.

Chancery Lane will be formally launched at the end of the year. It will charge investors an annual management fee of 1% and will use AJ Bell, James Hay and Transact as its share-dealing platforms.

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