It is definitely heading in to summer time as we all begin to think about the holidays. We did not think that there were many riveting articles around over the last ten days but there have been a number recently on risk rated funds. Not that they are riveting but they do raise questions about how to manage the process of using them, particularly the idea of outsourcing services. The key for us is the ability to retain the value component for your clients.

It seems that once you get over the initial idea that they can address all of your client’s needs and your own compliance obligations somebody comes up with a few stumbling blocks. Clearly work is still required to know that the funds don’t upset the rest of the apple cart or more accurately how they will upset the apple cart.

I think there is still a lot to be done in understanding risk rating and risk targeting which could prove harmful if not clearly understood. Personally, the idea of risk targeting could prove very difficult. It is inevitable as we have seen recently that we will be caught out by spikes in volatility, therefore plotting a path or planning for volatility would seem almost impossible?

We think this sort of approach is more relevant and specifically where we think the adviser can deliver value. Knowing why you have recommended an investment strategy is clearly vital but keeping an eye on the alternatives is a sobering process and challenges the original plan with hard evidence.

This brings us back to the fact that outsourcing is almost inevitable and particularly for small and medium sized adviser businesses. However, we are concerned that the baby goes out with the bathwater in many cases. For us it is vital to distinguish between adding value in the supervision of outsourced activity and passing the buck.

We are genuinely interested in creating an ETF review product and think these articles capture why there is merit in creating space for a passive investment strategy alongside a very focused active management strategy. If you have not considered ETFs they may be worth looking at as you adjust to your post RDR role.

Would you be interested in a product that analyses trends in products such as ETFs? If this is the case we would like to hear your thoughts.

Keith Reid
Keith Reid
Keith’s training as an accountant and auditor has emphasized the importance of evidence in all good decision making process. The ability to monitor management processes effectively is a key to making the most of business opportunities. Both Keith and Gerry believe that this priority for capital preservation is the common principle that sets the framework for any sound investment strategy or business model.