Broken RelationshipLast week I was in a meeting and as often happens the subject turned to personal experiences of investment advice and more accurately the investment supply chain. Unsurprisingly, the individual I was speaking to expressed their general disappointment with the adviser experience.

In short, the risk profiling was done and an appropriate product was selected from the available range. It would seem that the role of the adviser was executed as it should have been. However, this was probably several years ago pre-RDR and as a result the relationship or more importantly the product was selected and neglected. After 2008 and the dramatic declines in value all that could be said for the investment strategy was “It’s not worth selling now, leave it and it may gain value.”

Arguably, it is the responsibility of the individual to consider their investment portfolio and seek follow up advice and support when needed. The truth of the matter for the adviser is that the relationship is lost never to be recovered.

Asset Allocation Model 2Custody of the Investment Supply Chain

Now that the RDR and its pressures to qualify and adapt business models to remain in the game is beginning to recede in to the background we are all looking more seriously at the need to develop an efficient investment supply chain.

As the hub for the client relationship the adviser is in the privileged position of coordinating the efforts of investment brokers and managers that create the supply chain for capturing and retaining investment performance.

• How does an adviser or wealth manager deliver a continuous and smooth client service to achieve the goals of risk suitability, tax efficiency and investment performance?

• Just as importantly how can the adviser demonstrate that their recommendations and guidance are the key factors in delivering these results?

We have been working on a service solution that effectively links the tools that the adviser uses to:

• Assess the client in terms of risk appetite and tolerance;

• Determine tax effective investment solutions;

• Establish long term asset allocation.

With the investment selection process that they recommend to their clients.

Many of these tools have been refined to the level of checklists and are increasingly accessible through automated services eroding the relevance of the adviser or wealth manager unless they can demonstrate the difference in their client service through their recommendations.

The Relevance of Adviser Recommendations

The availability of adviser tools in the form of checks and balances that lead a client to a risk and tax appropriate investment solution is vital in ensuring compliance and execution of the advisers’ responsibility to their client.

However, you will not be remembered only for adhering to the process.

The client experience and loyalty is defined by the quality of your recommendations or more clearly your interpretation of the investment solution.

In many ways adviser tools such as risk profilers, independence checkers and broad asset allocation services bring you and your client to the investment crossroads. Your recommendation for equities, bonds and commodities or whatever form of active or passive risk rated fund becomes important.

What we understand is: there are as few as three or four key decision points in any year where your recommendation can make a significant difference for your clients’ wealth and future happiness.

If you are able to link why you make your asset allocation recommendations to how much market exposure you are permitting investment managers to take on behalf of your client your relationship is transformed.

You are no longer the passive bystander as the investment manager delivers performance. You hold the mandate for the investment manager to act on behalf of your client.

RDR 4Moving from What ? to Why ? and How Much?

We take up where the adviser tools complete their journey. Our job is to provide the information that enables the adviser to fine tune their client recommendations.

This could be as simple as adjusting an initial allocation to risk rated passive funds. Alternatively, it could be the more active fund composition for an asset class in a broader portfolio of investments

The importance of what we do lies in our ability to identify persistent price trends across asset classes, markets and industry sectors. In effect our analysis has the potential to reduce the risk associated with asset allocation decisions.

While the risk reduction may be minimal it is our constant attention to these matters that enhances capital preservation and positions your client portfolio to avoid downside risk and therefore compound the growth that it does achieve.

We are not about maximising growth during periodic opportunities we aim to stay in the best assets for the longest period of time. However, this requires a constant monitoring process.



Delivering Our Services

First and foremost we believe that each financial professional must have a clearly constructed view of their investment supply chain and how they manage themselves and potentially others in the process of delivering client results. The first question is do you have an action plan for poor performance other than relying on time to redress any losses?

Naturally we want to engage in this discussion because we can make a contribution to the solution. However, as we stand post RDR we think that it is important that your investment supply chain is visible to your clients because in the end your value lies in the effectiveness of your active recommendation strategy.

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.