The Partnership Podcast

Trust growth with Gareth Howlett

January 24, 2020 Season 1 Episode 2
The Partnership Podcast
Trust growth with Gareth Howlett
Chapters
The Partnership Podcast
Trust growth with Gareth Howlett
Jan 24, 2020 Season 1 Episode 2
Golden Charter

In episode 2, Malcolm interviews Gareth Howlett, trustee and Investment Strategy Group chair with The Golden Charter Trust. Gareth reveals new trust growth rates, and explains the inner workings of a funeral plan trust and how the trustees steward plan holder funds.

Show Notes Transcript

In episode 2, Malcolm interviews Gareth Howlett, trustee and Investment Strategy Group chair with The Golden Charter Trust. Gareth reveals new trust growth rates, and explains the inner workings of a funeral plan trust and how the trustees steward plan holder funds.

Malcolm:
00:00
Welcome to the second ever partnership podcast. I'm Malcolm Flanders from Golden Charter, and I'm here to talk you through the latest developments in the funeral profession.  This time we're diving into the world of trusts, their vital for funeral director's plan holder alike. Like anything else, there are plenty of developments to keep pace with an understanding, a trust position from the bottom line to regulation and, of course, the growth rate for funds held in trust. So this month we're gonna be speaking to Gareth Howlett, who's not only a trustee on the Golden Charter Trust but also chairs the investment strategy group, those funeral directors who have attended a G M's in recent years. We'll know that Garrett is a font of knowledge on the trust and the broader forces that interact with it. In this episode, we have the chance to dig into the areas Gareth discusses at each GM. So Gary delighted you could join us today for the broadcast. It would be really helpful if you could just talk a little about the role of trustees, but also just explain a little about the trust independence from Golden Charter itself.
Gareth:
01:11
Thank you very much Malcolm. Very pleased to be here. Those of you who've heard me at the GM, I know that I do tend to Witter on a bit about numbers, but I also tend to try and make the point that beneath the numbers and belief, the structures, the purpose of the trust is to support the funeral directors. The key actors in this are the funeral director on the plan holder and their families. The rest of us, really just the supporting cast, the trustees, they're all in. This supporting cast is to look after the money, too, in gather, which is a rather nice Scots legal term, the money to look after it and pay it out on me in the interim to make sure that it's being properly invested so as to produce a return that gives the funeral director a decent margin on the business when they eventually come to carry out the funeral. We do this using our professional experience, and there is a blend of experience within the existing trustee board. There are a couple of accountants, Webster Geraldine Gammell, a senior corporate lawyer, Gordon Broth in Barnet, who many off you will know apart from being a golden Charter veterans senior banking person Paul Stephenson, very importantly, who represents the funeral directors on DH myself in Blackford and David Kid, who were all investment specialists on DH, we the last three named Sit on the Investment Strategy group, which I chair weigh our completely independent ofthe Gold Charter Limited. Although we worked together very closely, we work hand in glove, we are not financially linked to them, are about a treat, is not their balance sheet, and vice versa. So that gives a great deal of comfort to people who have a vested interest in the trust that their interests are going to be looked after. First and foremost.
Malcolm:
03:14
Excellent. Thank you, God. Now another sort of topic that comes up quite frequently is the actual race of return in terms of the growth again, can you explain how that is determined? The process you go through on DH what that rate is for this
Gareth:
03:28
year, we start by trying to ensure that anything we do maintains the funding level and ideally, we want the funding level. That is the ratio between our assets and our liabilities to be over 100%. The colloquial way of putting that is jam Today versus jam Tomorrow we could pay out a substantially higher increase in any given year. But the cost ofthe crimping returns for future years on reducing the funding level, so balance has to be struck. And I think most people in their own businesses will recognise that these were the kind of calculations that they will have to do themselves this year. I'm pleased to say that we've been able to maintain the funding level above 100% while matching inflation on, we're paying an increase off 2.4%. So those of the calculation which we go into, we do not. Am I getting the maximum possible return irrespective of risk. We look at it in a different way. We want risk adjusted returns. What we ask ourselves is what is the way of investing these funds that will generate the returns that we need at the lowest possible risk? If there are investment policies out there, that would probably give you higher returns, but they would equally probably or even more probably bring with them much higher risks. It's what I like to call percentage golf. You can either get out the driver and go for the green, or you can hit a couple of safe iron shots down the middle. We don't need to play aggressive. My stakes, high risk golf. And that's not what we're here to do.
Malcolm:
05:26
Understand that I like the analogy on I guess that kind off approach is a sensible given what's around the world today in terms of volatility, and we just don't know what's happening. But from your perspective, do you see a more stable outlook? Or do you think it remains as volatile as there has been?
Gareth:
05:42
I've been an invest manager for over 30 years on DH. The one constant is that there is always something to worry about On DH proverbially markets climb a wall of worry. Whether you're talking about the 19 eighties and everything that we're worried about then when I started my career or the 20 twenties, the new decade that we're now moving into, there are always things that are likely to throw markets into turmoil. However, underlying that, what drives returns on assets is the income from these assets so long as company profits keep going up as long as rents keep going up. Those economies keep on expanding. Broadly speaking, financial assets should do. Okay, We've had a pretty good run in asset markets. Better, I think, than many office. Certainly the more cautious people, and I would count myself in that number we're expecting, So it would be prudent to expect at some point within the next year or so a bit of a pothole in the road. We don't know when that's going to happen. We don't know how bad it's going to be. All we can do is invest the money prudently on a diversified basis on making sure that in each case, the people looking after the money, our specialists of what they do on DH we believe that that policy will carry us through without too much damage.
Malcolm:
07:20
If I look back in the history of the trust, there was a point when it wasn't quite as robust. Where are we now? Just in terms ofthe the actual evaluation of the trust?
Gareth:
07:31
Well, the evaluation now as at the end of December wasjust a whisker short of £1.2 billion which of course is a very big number on DH. It's almost doubled in the five years that I've bean a trustee. And of course, that much of that has come through increased cash flow. Funeral directors selling more plans, a fair amount of has come through investment returns. Overall, the most satisfying thing is that the funding level has remained over 100% overall. That period on DH, there are a number of metrics we carry out. Could we pay out on all the plans if everyone cancelled Could be pouting all the plans if everyone was to die in the same time on the answer this according to our actuaries, If yes, in both cases, more realistically, we also project into the future. What are liabilities are going to be based on an expectation of mortality. Hammond fan holes are going to die on dawn inflation, and then we measure that against the expected investment returns. Inevitably, there is a degree off guesswork in that. Now those guesses are very scrupulously calculated, but they are not absolute guarantees. To the extent that they have bean fairly rigorously carried out, the number now is over 100%
Malcolm:
09:13
on DH. If if we project forward, five years does the governance or the approach or the investment strategy change. If that fund gets significantly bigger? I don't think
Gareth:
09:27
so, because the core off what we are doing is the strength of the relationship between each funeral director and each plant holder. And that's not going to change. We take in some of money from a plant holder on. We make a promise to that plan holder on whether there are 400,000 half a 1,000,000 plan holders. Yes, the calculations remained the same. One of the things I would say is that having a big, well funded trust has been very important in the sense off the infrastructure we raised to surround it with. If you go into the city of London with three and 1/2 £1000 for £4000 you're not gonna get very far. If you go in and slapped down 1.2 billion on the table, you'll get a lot of serious attention. So we have got access to the best asset managers that the city of London or globally, because we some of our firms, are not based in London, they're not based in the UK. We have got access to the best that money can buy worldwide. We couldn't do that if we were a small shoe string. Trust were a serious operation, and we're taking it seriously.
Malcolm:
10:44
Excellent. Anything that that that also differentiates us in the market. Actually, if I'm honest from a business perspective, Okay, Gas, one final point. It has been confirmed, and we're now planning for it. The fact that the funeral planning sector will be regulated by the FCC A How do you see that impacting on the way the trust is managed at the moment and what it seeks to do in terms of its
Gareth:
11:08
objectives? Well, I think this is, on the whole, a very positive development for the trust and indeed the company, because one of the motivations off the regulator has been to drive up standards in the industry on DH to align everyone else is on the high standards. That Golden Charter has always stood for you. This is going to be easier for us to adapt to that. It is for many other people I know from those within the company and the trust who engaged with the regulator that they've been very favourably impressed by the way were set up by professionalism. This is no surprise to me, of course, but it's really quite reassuring, I think, for outside people who have a relevant interest here. I've always thought that while investment managers like to complain about regulators, in a sense they are a source of free advice. They can help you raise your game. They are concerned with outcomes for the consumer. They're very concerned with fairness, transparency, professionalism, value for money, treating customers fairly. All of these things are so deeply embedded in the Golden Charter way of doing things that I think it's really a very positive step forward for all of us, and that we should absolutely embrace it. It will obviously mean change will have to adapt ourselves to that extent, but I think it's a really tremendously positive move.
Malcolm:
12:46
Excellent. Garrett, Thank you. That is reassuring on DH for the purpose. It is always a canter through on his podcast. But I think you've given us a really good insight into what the trust is about how it is managed. So thank you. Appreciate that
Gareth:
12:59
for thank you very much. Malcolm has been a great pleasure.
Malcolm:
13:03
Thank you for listening to another partnership broadcast. These will be coming to regularly throughout 2020. Subscribed to us on apple podcasts, Spotify or ever You get your podcast to ensure you get episodes as soon as they appear Well, keep your eye on golden charter dot bus sprout dot com for our full feed of issues. And, of course, Golden Charter will keep you up to date with new issues by email. I'll talk to you next time on the partnership podcast.
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