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Why discretionary model portfolios can be the right client solution at the right time

Al Ward

Al Ward, Head of Platform Proposition, takes a look at the benefits of outsourcing investment solutions for clients to discretionary model portfolios and how technology available on Elevate can help.

Firstly, I hope you’re well, looking after yourself and coping with whatever restrictions currently apply in your area.

In my last blog in July, I wrote about how these challenging times may make it a good opportunity to re-evaluate your key services, including your Centralised Investment Proposition (CIP). I also covered how Elevate’s technology can help with the running of in-house advised model portfolios, access to multi-asset solutions or with outsourcing to discretionary model portfolios; and how advisers are increasingly questioning whether an in-house or an outsourced investment approach is the better option.

The answer to this question hasn’t changed. Favouring either an in-house or an outsourced investment approach ultimately depends on client needs and your advisory business model.

The benefits of choosing discretionary model solutions

I regularly hear that the Covid-19 pandemic, compounded by market uncertainty and an ever-changing ‘normality’, means the priority is building and maintaining relationships with clients, understanding their needs and finding solutions for them. And if clients value your expertise to help make sense of the current turmoil and keep them on the right path, then outsourcing investment decisions to a discretionary manager can give you more time to focus on financial planning and help you maintain those strong relationships.

In terms of other benefits of choosing a discretionary model portfolio, this solution can help alleviate your firm from some of the ever-increasing regulatory pressures and de-risk your business. With less of an investment management burden on your business and the associated regulatory costs, you can concentrate on developing more client relationships.

Focus should always be on value

However, I know some have concerns over additional layers of cost as a reason for not outsourcing to discretionary managers But costs can vary significantly. It’s important to remember that when running an in-house CIP, there are cost burdens to be accounted for and multi-asset fund costs can add up. Choosing to outsource may actually work out cheaper.

Therefore you should consider all costs when choosing an investment solution for clients and, before selecting a discretionary manager, complete a ‘whole of market’ comparison; as well as demonstrate suitability for each individual client.

An extra cost element doesn’t have to mean increased total charges for the client.

The ultimate focus though should always be on value, not costs or charges. Clients are paying for your overall service offering and if outsourcing helps the client achieve their investment goals, it should be considered as part of the suitability review.

Staying in control

Of course, when outsourcing, the relationship between your clients and the discretionary manager should also be considered as this can vary. The nature of the relationship has to be one you’re comfortable with.

The discretionary manager’s terms of business determines the tasks he or she can do without asking you or your client. It’s important, therefore, that these are thoroughly reviewed.

This is an area where platforms can help by ensuring your clients benefit from a discretionary wealth service where you stay in control.

On Elevate, we’ve expanded the range of discretionary manager partners offering Separately Managed Accounts (SMA). In addition, the platform’s simplified process for buying, selling and switching SMAs mean it’s as easy as selecting a fund.

Our platform technology also gives you the ability to effortlessly mix and match solutions from single or multiple discretionary managers to meet different client needs at different times. It means you can support clients with multi-goal investment objectives while helping them achieve good client outcomes.

The technology can also help you meet your full MiFID reporting requirements, so helping reduce risk in your firm and give you reassurance. And Elevate’s straight through processing for payments and withdrawals means efficient portfolio management for your firm.

On top of all this, we’ve recently upgraded Portfolioscan™, Elevate’s tool offering enhanced client reporting, with integrated SMA capability. It means you can present clients with a full portfolio breakdown and analysis for assets held in discretionary model portfolios. Portfolioscan™ is designed to support your client conversations and allows you to produce reports tailored to their individual needs.

Supporting better outcomes

On the subject of outsourcing, on a personal note, it’s great to be outsourcing childcare again. My eldest has started university and my youngest daughter has started school, which I guess is a lot like outsourcing investments.

You’re happy that a trained professional is helping them meet their potential but you want to be involved in what’s going on, have the comfort that they’re on track and, at the end of the day, that they’ll hopefully out-perform.

But, above all, whether it’s your family or your clients, you want them to be happy, confident and reassured, especially in unsettling times.

Speak to your usual Standard Life contact if you would like more information about Elevate’s range of discretionary manager partners offering Separately Managed Accounts or take a look here.

 

The value of investments can go down as well as up, and could be worth less than originally invested.

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