Platform technology

How Professional Portfolio Manager can help improve individual client outcomes

Alastair Black

Platform technology can do more than help firms to scale their advisory investment processes and meet the mandatory regulatory obligations – it also offers opportunities to help improve client outcomes as Alastair Black, Head of Wrap Platform Proposition, reports.

While the public has eagerly embraced the new financial flexibility pension freedoms offer, one side effect of this popular policy is that it has driven up demand for advice. Many people recognize that the decisions they take with their pension pot after reaching 55 affect their financial well-being over the long-term, and want professional financial advice. This growth in demand is a good thing, but managing the additional workload caused by an expanding client base can create capacity challenges for adviser firms.

Helping clients to make the most of their pension savings – often for decades after their active work years have ended – can be complex. Advisers might help clients with standard issues like taxes, investments, and goal setting. But there can be additional considerations as clients age, because aging brings many changes, from health setbacks and family issues, to late-life divorce and the death of loved ones – all of which have financial implications.

And as required by MiFID II regulation, advisers now need to provide ongoing suitability reviews to help clients in drawdown. Preparing and conducting these reviews for a large – and growing - client base is a significant undertaking.

It’s no surprise then that we often hear from advisers who tell us that they are stretched very thin. However, platform technology has the potential to help advisers scale their advisory investment processes, meet mandatory regulatory obligations, and keep up with demand. And by incorporating additional features, platform technology can offer other capabilities designed to help advisers improve client outcomes.

The new Professional Portfolio Manager (PPM) capability for the Wrap platform has been built with cutting-edge features that can help advisers serve clients more effectively in any stage of their financial life cycle, but which are especially helpful for clients in drawdown.

The benefit of PPM is that it offers advisers increased efficiency, flexibility and control to support client outcomes with:

The ability to mix and match models to support multi-goal and multi-pot strategies

Many clients have multiple goals – some long-term and some short-term. With PPM, advisers can support a client’s varied income goals using multi-portfolio strategies, mix and match multiple model portfolios, and mix model and non-model assets within the same tax wrapper.

This flexibility can help advisers to design investments that align with client needs, goals, time frames, and investing objectives.

The ability to control income strategy at model portfolio level

Advisers can designate portfolios as either income paying or income reinvesting. By building portfolios specifically to pay out natural income or to reinvest, advisers can develop retirement solutions with income-producing and growth models used together, depending on client need.

Payments and withdrawals can be timed and executed automatically to fit with the investment philosophy and reduce portfolio drift.

The ability to access cost-efficient ETI trading

PPM leverages the power of bulk processing which translates into lower dealing costs. Aggregated trading also ensures consistency because all clients in each model portfolio get the same price and execution.

PPM also provides advisers with access to lower cost exchange traded instruments (ETI) with a dealing cost of £1 per trade, per client.

The ability to reduce risk

Advisers have had the option, in theory, to use manual processes for these tasks until now. However, they are tasks that are - in practice - laborious. Furthermore, when firms carry out tasks manually, the potential for error increases. But by handling these processes automatically, PPM helps to mitigate risk and reduces the likelihood of error.

The ability to improve client service

When firms improve efficiency, they can introduce new offerings that enhance client services. We believe that our new PPM capability will free up time to allow firms to focus on tasks to help improve client outcomes.

Conclusion

As successive waves of individuals reach the age of 55, the number of clients seeking advice for drawdown is increasing. Many adviser firms are facing hard truths as a by-product of the public’s ready acceptance of pension freedoms and a widening number of regulations. But platform technology that can help advisers manage complexity and stay in control - plus incorporate processes designed to enhance client outcomes – are important steps towards helping adviser firms improve the financial well-being for clients in drawdown.

 

It's important to remember that a pension is a long-term investment. As with any investment, the value can go down as well as up, and could be worth less than originally paid in.

The views expressed in this blog should not be regarded as financial advice.