Helping to Manage Client Interests

The aim in our initial blog items has been to consider some of the practical concerns that an adviser may have in managing client interests effectively in the long term, which is the ultimate objective of the transition to adviser charging through RDR.

We have considered outsourcing investments, dropping poor performing funds and the potential effect of VAT registration on their business. At the same time and because we are in the process of launching our products and services we have also provided an indication of where we believe we might fit in to your business.

For those of you that have read this far you will begin to appreciate that we see our reports as complimentary to many of the tasks that an adviser must complete on behalf of their client. One aspect that is vital to the client relationship is conducting effective investment reviews.

Timing the Client Review Process

Before focusing on the individual review process we assume that the adviser has taken care of the big things, such as identifying their preferred investment manager and securing access at best prices to a range of investment opportunities that are tax efficient and broadly “suitable” for their clients.

With these business relationships in place you are obliged to conduct a continuous process of researching, reporting, arranging and monitoring product performance. We expect that a great deal of this will be done with the information provided by your chosen investment manager or managers. Whether you are independent or tied this is a practical and realistic means to managing a large component of your responsibility to your client.

Where we want to make the difference for you is in filling the gaps that exist naturally in this process. Your investment research will more than likely be static in nature. By this we mean that the reports that you use refer to a point in time and the outlook based on available information.

However, by relating your chosen investment manager and their funds to the markets and sectors that they have invested in our weekly analysis can become the link from one update to the next.

Your Role as the Asset Allocator

For example if your investment solution has scope for an equity investment in the FTSE or S&P 500 your manager(s) will be pre-selected for their respective expertise in each market (the strategic evaluation is done). In simple terms you are then left with the timing of the allocation decision, how much to each fund?

We should avoid any confusion at this stage. Do not assume that asset allocation is done by your chosen manager. You have given the client mandate to this manager to make decisions within the scope of their investment universe.

As a matter of prudence, we always expect you to maintain exposure to your chosen range of markets for sound long term reasons. Our view is that you want to be able to allocate some of the portfolio as “floating” funds to the opportunity with the greatest likelihood of success on a timely basis.

Using our trend analysis at the point of establishing the fund and at any given week when you are subsequently reviewing the allocation to managers, you may be able to tilt your client’s investment exposure to the market that is performing more effectively for the interim period until the next scheduled review.

Seeking A Winning Start For Your Client

In simple terms we see it as attempting to get your client a winning start in the first few months of the portfolio being established and just as importantly, when the majority of fees are charged under RDR. Thereafter we know that it is easier to develop the relationship with a cushion of positive performance.

As you become more effective in reviewing the trend analysis you will begin to appreciate the importance of good timing and the relevance of having up to date market information at hand when you are conducting a client review.

Developing Your Own Working Practices

Once you have profiled the client and identified the tax efficient investment vehicle, your ability to allocate assets more effectively will maximise investment performance. We are not promoting a radical or aggressive switching of funds that is often undermined by additional costs.

We are suggesting that a weekly review of trends across many markets and capitalising on the optimal allocation of assets to managers when your client is under review can make a difference to your relationship and long term client retention. We believe that there is substantial evidence that a slow and steady approach to re-balancing portfolios that can have a dramatic effect on long term growth for your clients.

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.