Guide to Buying Power on SS&C Hubwise

The purpose of buying power on Hubwise is to maximise performance of a client investment, by minimising the cash held in their account(s). This solves the problem of keeping an arbitrary fixed percentage of cash on an investor’s account, obviating the need for the adviser firm to manually review and manage the account liquidity position.

The buying power process forecasts the known outgoing commitments of fees and regular withdrawals over a defined, and configurable future period. This forecast does not consider any future cash incomings such as interest or dividends.

1. Configurable Attributes: Partner firms can set different periods for holding back cash for fees and withdrawals.
2. Elements of Configuration:
   • Buying Power (Hold Back): Amount held back from the first investment.
   • General Buying Power Algorithm: Maintains cash through proportionate disinvestment.
3. Calculating Cash Required: Based on the configured frequency for each deduction type, including various fees (Adviser Annual, DFM, Platform, Product).
4. Exclusions: Cash for phased investments and ring-fenced cash are excluded from the buying power calculation.
5. System Events: Certain events trigger real-time recalculations of buying power, such as switches, rebalances, investments, and withdrawals

Partner firms can configure the period for holding back cash for regular commitments. The available periods are 3, 6 or 12 months and it is expected that the Partner Firm will define the parameters for their proposition, and this will apply to all firms and advisers operating under their Platform.

This configuration applies to fees and regular withdrawals and the setting can be different for the two. This could be 3 months for fees and 6 months for withdrawals for example.

There are 2 elements to the configuration:

1. Buying power (hold back) which is the amount we would hold back from the first investment into an account/wrapper 
2. General Buying Power algorithm (proportionate disinvestment) which maintains the cash.

The required amount for future regular withdrawals and fee commitments is calculated based on the configured frequency for each deduction type.

Fee Deductions

Ongoing fees are calculated based on the account’s current AUM and multiplied by the configured fee frequency.  The total amount of fees due is deducted from the cash available.

The following fee types are included in the fee calculation – where present:

• Adviser Annual
• DFM 
• Platform
• Product *

Cash for Phased investment

Cash lump sums that have a delayed or drip feed investment instruction are excluded from the buying power calculation.

Note that any cash which is held in a model portfolio, as a cash ISIN, is not included in the buying power calculation as it is part of the investment and, therefore, part of the portfolio valuation.

Ring-fenced cash

Any ringfenced cash is protected for a specific purpose and the ring-fence would need to be removed before any system event could use that cash. Ring-fenced cash is, therefore, ignored in the buying power calculation.

Regular Withdrawals

Any regular withdrawal instructions which exist on the account* are calculated within Buying Power to the configured period (3, 6, or 12 months).  The total of these withdrawals per account will reduce the amount of cash available within the buying power calculation.

*Where a new regular contribution is added to an account (or there is a change to an existing regular withdrawal), this will not trigger a buying power recalculation but the next time there is a buying power trigger the new regular contribution value will be included in the calculation.  

Example 1 – Cash shortfall in buying power calculation

Account Value £250,000

Current Cash value £1,000 (outside of any model portfolios, and after allowing for any ring-fenced cash or cash for phased investment)

Buying power amount required £3,000 so sell down of £2,000 required (£3,000 - £1,000 Cash = £2,000)

Same scenario but with a new additional contribution:

New contribution £50,000 received.

Buying power is recalculated to include the new £50,000 and now £3,600 (due to the higher account value) is required and is the new buying power amount

Amount available for investment = Contribution received less buying power amount required

£50,000 - (£3,600 buying power amount -£1,000 current cash) = £47,400 invested into the model portfolio

Example 2 - Excess Cash is buying power calculation

If available cash is greater than the buying power amount, then no investments will be sold down to fund the forecasted requirement. If there is surplus cash available this will be invested into the model portfolio on the Account.  

Account Value £250,000

Cash value £5,000 (outside of any model portfolios, and after allowing for any ring-fenced cash or cash for phased investments)

Buying power amount £3,000 so no sell down and £2,000 (described as ‘surplus cash’) will be automatically invested into the model on the account (£5,000 cash - £3,000 buying power amount = £2,000) on or around the 22nd monthly as part of the income re-investment sweep.*

Any overdrawn/negative cash at the time of the calculation (very rare) will be added into the next buying power calculation to ensure that the overdrawn position is cleared, and the required buying power amount is available.

The following events recalculate buying power on a real time basis as and when instructions are received:

• Switch – Change an account to a new model and rebalance to the new model
• Rebalance - Realigning the investments back to original weightings.
• Investment – all Cash investment other than regular payments-in (Direct Debits) which are excluded from buying power calculation and are always fully invested.
• Withdrawals – Ad hoc or regular, across all product types where not made from available cash.  For an ad hoc withdrawal the recalculation of buying power will be based upon the account values after the withdrawal.  So if there is a value of £100,000 and a £25,000 withdrawal, the buying power calculation for future charges will be based upon £75,000.

Surplus Cash Investment (where an account has Income Options set to “Reinvest any income into the underlying model”) - On 22nd (Or earlier if 22nd is a non-business day) of each month the income invest process is run.

Buying power is calculated to determine the surplus cash that can be invested.  

The minimum income reinvest is £10.  If less than £10 it will be held until the total on any 22nd of the month is > £10.

All the above events will recalculate and reset buying power before calculating trade values and allowing the trades to take place. 

NB There is a known current issue where there are regular contributions on GIA /ISA accounts.  When there are open orders (in flight trades) in respect of the investment of the regular contributions, the income reinvest/surplus cash process does not run, and any distributions remain in cash.  This is because the regular contribution collection date has historically been the 18th which clashes with this process.  We have just (December 2024) expand the number of collection dates to be 1st to 28th of the month which will alleviate this problem (where dates around 18th  to 22nd are not selected) and there is also a development item raised to fix the issue.

*NOTE: if Income Options are set to either:

• Use as available cash.
• Withdraw all income into a designated bank account.

Then this automated Surplus Cash Investment will not take place.

The total required for all deduction types listed above becomes the buying power amount required.

If the buying power amount is less than the available cash, the system will raise further cash to rectify (trades are placed 10 days prior to a known future deduction that would exhaust all current buying power cash and would cause the account going into debt to fund that payment.)

This ensures minimum liquidity and maximum investment levels. If there is an event e.g. new money-in, the system will hold back the monies before investment to rectify the buying power shortfall so that such a raise is not necessary.

Cash from Natural Income (where automatic reinvestment has not been selected) is considered in these calculations as ‘available cash’ and can be used to pay fees.