Wednesday 04 September 2019 by Jonathan Sheridan 5 Sept under the hood-wire-article At FIIG

The FIIG client experience – what’s under the hood?

When investing, most people focus on the particular security they are buying and the associated risk and return. Clearly these are the headlines that need to be considered, but it is very important to take into consideration all the other, unseen benefits that are afforded to you as a client of FIIG.

When markets are fine and there is little stress, these things can seem inconsequential – everyone does them right?  Unfortunately not, and when the stress does arrive, it typically arrives quickly, and usually too late for the average investor to influence the outcome.

Examples that spring to mind are the high profile stockbrokers that went under in the GFC that had pledged client assets to support their own business, such as Tricom or Opes Prime.  Investors lost everything, not just the mark-to-market on their investments!

Here we highlight a number of functions or services that FIIG clients receive as a standard part of their relationship with us:

1. Custodial Services

FIIG is a licensed custodian, regulated by ASIC. To qualify, we must hold a minimum of $10m of liquid assets, and provide sufficient infrastructure in terms of people and IT resources to adequately manage such a service.

We partner with JP Morgan to utilise their scale of platform and global expertise.  

Additionally, each year, FIIG undergoes a process whereby we receive a GS007 accreditation, which means we meet the highest global standards in providing a custody service.  We recently were awarded this again for 2019 – see our Custodial Services page for details.

Download the Deloitte Corporate Bond Report

The custodial service is a premium offering, and covers details such as coupon payments made the same day as received and all corporate actions covered and supported by a research opinion.  This adds significant value, and as such the fees charged are transparent to allow this value to be seen, rather than hidden away.

2. Extensive educational resources

FIIG has prided itself in the 21 years we have been in business on lifting the awareness of the fixed income asset class more broadly across Australian investors.

We have a huge amount of information available to existing and potential clients, much of which can be found on our website. Our clients also have access to a dedicated online account portal that provides regular news, updates and analysis on many of the bonds we are offering.

As an example, some of the collateral we publish can be found at the following links:
Welcome to FIIG
Benefits of Corporate bonds e-book
How to build a balanced bond portfolio e-book

3. Comprehensive Legal and Research analysis

The documentation that describes each bond can be detailed, long and complex.  Before we make any bond available to clients, it goes through a rigorous process to allow it on to what we call our DirectBonds Service .  This is where bonds are made available in parcels smaller than the institutional minimum of $500,000.

We partner with a leading US-based credit research business, CreditSights, to allow us on-the-ground coverage of the majority of the USD-denominated bonds we offer.

Part of this process is a review of the protections afforded to investors, called covenants, which govern the behaviour of the issuer, such that they must maintain certain financial standards, such as a minimum amount of profit to cover interest payments (the ‘interest cover ratio’).

Minimum parcel sizes:
Additionally, when you buy a bond, we ensure you legally obtain a right to the bond as a beneficial interest.  This means you are the legal owner of the bond outright interest and your right to own this bond complies with all laws and regulations.

We have seen other providers in the market sell bonds in parcels smaller than the legal minimum, without disclosure, which means investors may not be in possession of the asset they think they are.  

4. Investing tools

We provide access to many tools and services helping investors to make decisions about which bonds to buy or sell, such as relative value analyses and commentary at a market or individual bond level.

We publish mid-market prices daily here so that investors have the ability to make a comparison between the prices they are being offered and the market level.

One new, unique tool we have recently launched is the FIIG High Yield Index.

This index is the first index to exclusively cover high yield and non-rated bonds in Australia. Its first-of-its-kind design provides individual and corporate investors and financial advisers a unique assessment of the high yield AUD market.

The index, which has data as far back as 2012, has generated an annual return of >7% p.a. over that period.

These are just some of the benefits that are available to FIIG clients in addition to the actual bonds that you invest in, but no less important in considering the overall service we provide. If you would like further information on these, or any other of the services we provide, please don’t hesitate to get in touch.