In
my “Where’s the money going?” Blog (Feb 14th, 2013), I mentioned the growing area of
the Advisor Portfolios or Advisor Propositions.
To
explain some of the reasons for this growth, let me go back to that period between
2007 and 2009. At the time it was estimated that 70% of pension money was held
in Managed funds. A well established, general one-size fits all approach with
some add-ons attached over the years i.e. Consensus and Life-styling. The
strength of the Managed fund was diversification.
As
we know, there’s nothing like a health scare to get a client to question
his/her protection benefits. And in the same way there’s nothing like a market
crash to get a client to question what went wrong?
For
me some of the big questions that came from the crash about Managed Funds were:
Did
clients believe that a fund manager could switch easily to other assets?
Were
clients aware of the restrictive parameters that were set for asset allocation?
Were
clients aware of peer pressure, with fund managers constrained by benchmarking?
In
summary - Who was managing the risk?
The
realisation of the constraints of a Managed Fund, were hitting home hard. There
were very few clients who had the knowledge (or interest) of how a Managed Fund
operates, but the impact to their funds got them to take notice. That notice
came in the form of worry, panic, anger and accusation. Not a pleasant time for
all involved.
The
response from fund managers has been to develop and promote their absolute
return or risk-managed funds. A promise to focus on the risk and not just the
assets.
The
growing response from Advisors, has been to take ownership of a clients asset
allocation and risk management. The availability of platforms, index funds,
ETFs, bank deposits, stockbroking accounts etc. has made it easier to offer a
more involved and controlled strategy.
Advisors
who have adopted this investment model believe that this offers a more
collaborative approach with clients and promotes a better client relationship.
The
growing number of Certified Financial Planner ™ professionals and the possible
move by the Central Bank to a review similar to the UK’s Retail Distribution
Review, are other contributors to ITC seeing an increase in the Advisor
Portfolio/Proposition approach.
As
you know, the ITC products offer the Advisor and their clients, the structures
to have choice, transparency and control.
Martin Glennon
Corporate Account Manager
