A blog with related materials and commentary towards increasing consumer influence on the wealth management industry.
Friday, September 14, 2012
The shifting nature of customer value in Portfolio Management
From my perch in the UK, I continue to observe an increase in the pace of change in the wealth management industry. We all know that the contemplation period for change is over - the future is no longer the future.
Speaking to clients in the past few days, it is clear that running a successful portfolio management is now about much more than designing and implementing individual portfolios.
A new era of customer proposition has emerged: one that is as much about transparency as it is about portfolio composition. The implications of this are enormous: genuine transparency suggests business processes that allow clients (in addition to wealth managers) to work intensively with their portfolios and in genuine collaboration with their wealth advisors. This has resulted in a new paradigm for customer value in wealth management today - value is received as a living entity as opposed to be sold like a commodity.
Clients as partners, expect to receive value in a multi-faceted, dynamic way as opposed to a linear deliverable. To achieve this in a sustainable manner, wealth managers must not only be responsible, they must be responsive. Responsiveness is a full-time, intensive proposition. This is not just the way of the future. The future is already in play.
Thursday, September 6, 2012
Shoe Horning
There has been much discussion and concern by the FSA in the UK about caution in the appropriateness of developing centralised investment propositions (CIPs) and 'shoe horning' investors into such.
Whilst at face value this seems to be a reasonable concern to protect investors being put into CIP schemes largely set to meet the approximate needs of a customer segment, or investors with a category of risk profile, rather than the investor themselves, a number of questions come to mind:
Q1) how is this different from placing investor monies into specific investment products that are managed to a set mandate as opposed to an investor's specific situation (see earlier post on this BLOG about need for individual portfolios) ?
Q2) what if the CIP was flexible enough to accomodate the individual circumstances, needs and plans of the investor, resulting instead in a very personalised, but centralised investment process ?
In relation to Q2, should this be available and viable? (This is the core of the Financial Simplicity capabilities). Then wouldn't it be very much 'right' for the investor? It would also be a positive to encourage participation in the CIP and 'shoe horn' investors into it.
Whilst at face value this seems to be a reasonable concern to protect investors being put into CIP schemes largely set to meet the approximate needs of a customer segment, or investors with a category of risk profile, rather than the investor themselves, a number of questions come to mind:
Q1) how is this different from placing investor monies into specific investment products that are managed to a set mandate as opposed to an investor's specific situation (see earlier post on this BLOG about need for individual portfolios) ?
Q2) what if the CIP was flexible enough to accomodate the individual circumstances, needs and plans of the investor, resulting instead in a very personalised, but centralised investment process ?
In relation to Q2, should this be available and viable? (This is the core of the Financial Simplicity capabilities). Then wouldn't it be very much 'right' for the investor? It would also be a positive to encourage participation in the CIP and 'shoe horn' investors into it.
Social media: the wild west of financial advice
Interesting article about some of the consumer / social media trends under way.
As I learned at the Social Media Summit in Sydney in 2011 - Assume full transparency!
http://www.professionalplanner.com.au/technology-2/social-media-where-the-eyeballs-are-going-for-financial-advice/
As I learned at the Social Media Summit in Sydney in 2011 - Assume full transparency!
http://www.professionalplanner.com.au/technology-2/social-media-where-the-eyeballs-are-going-for-financial-advice/
Wealth managers to face closer scrutiny as FSA unearths ‘widespread' failings
Article From Citywire....Emma Dunkley. Looks like systemisation and suitability are going to leave little room for error.
http://www.citywire.co.uk/wealth-manager/wealth-managers-to-face-closer-scrutiny-as-fsa-unearths-widespread-failings/a614420?re=20392&ea=314126&utm_source=BulkEmail_WM_Weekly&utm_medium=BulkEmail_WM_Weekly&utm_campaign=BulkEmail_WM_Weekly
The Financial Services Authority (FSA) is contacting firms offering wealth management services after identifying ‘significant widespread failings’ around record keeping and suitability and has said the sector may face tougher supervision as a result.
The watchdog wrote to all chief executive officers of wealth management firms in July, highlighting research that revealed major failings based on a sample of firms.
However, the FSA is concerned these failings stretch beyond this sample and are prevalent among other wealth managers.
The FSA said: ‘We have now commenced a new phase of thematic work and will, again, be making judgements on the suitability of client outcomes but also complementing this approach with a direct assessment of firms’ systems and controls.
‘We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications. We will provide further updates on this work in 2013.’
The watchdog said it continues to work with firms from the first batch it assessed, in order to mitigate the risks and concerns that have already been identified. In some cases these led to enforcement referrals, skilled person’s reports and remediation programmes.
The FSA said it will plans to interview key individuals from all these firms so it can understand the approach they have taken to remediate the problems revealed in their client portfolios and whether they have been ‘rigorous’ In dealing with previous issued that may have caused consumers to suffer.
Subsequent to these interviews, the FSA will consider whether to take further regulatory action, it said.
In the initial ‘Dear CEO’ letter the FSA said that its findings aired concerns there is an ‘unacceptable risk’of clients of wealth management firms experiencing unfavourable outcomes.
It said: ‘The failings may point to deficiencies in the management and control architecture of firms, so wealth management businesses can expect to see continuing and increasing supervisory focus.’
http://www.citywire.co.uk/wealth-manager/wealth-managers-to-face-closer-scrutiny-as-fsa-unearths-widespread-failings/a614420?re=20392&ea=314126&utm_source=BulkEmail_WM_Weekly&utm_medium=BulkEmail_WM_Weekly&utm_campaign=BulkEmail_WM_Weekly
The Financial Services Authority (FSA) is contacting firms offering wealth management services after identifying ‘significant widespread failings’ around record keeping and suitability and has said the sector may face tougher supervision as a result.
The watchdog wrote to all chief executive officers of wealth management firms in July, highlighting research that revealed major failings based on a sample of firms.
However, the FSA is concerned these failings stretch beyond this sample and are prevalent among other wealth managers.
The FSA said: ‘We have now commenced a new phase of thematic work and will, again, be making judgements on the suitability of client outcomes but also complementing this approach with a direct assessment of firms’ systems and controls.
‘We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications. We will provide further updates on this work in 2013.’
The watchdog said it continues to work with firms from the first batch it assessed, in order to mitigate the risks and concerns that have already been identified. In some cases these led to enforcement referrals, skilled person’s reports and remediation programmes.
The FSA said it will plans to interview key individuals from all these firms so it can understand the approach they have taken to remediate the problems revealed in their client portfolios and whether they have been ‘rigorous’ In dealing with previous issued that may have caused consumers to suffer.
Subsequent to these interviews, the FSA will consider whether to take further regulatory action, it said.
In the initial ‘Dear CEO’ letter the FSA said that its findings aired concerns there is an ‘unacceptable risk’of clients of wealth management firms experiencing unfavourable outcomes.
It said: ‘The failings may point to deficiencies in the management and control architecture of firms, so wealth management businesses can expect to see continuing and increasing supervisory focus.’
Monday, August 27, 2012
‘DIY’ model portfolios on the increase - FTAdviser.com
This is a really topcial article in much of my work at the moment and highlights the further industry supply chain 'pirating' going on: Players in the supply chain (in this case, advisors) are doing more and more to maintain relevance and margin in their businesses.
Are we entering an era in which there is going to be a desperate competition for securing the relationship with the client? Will platforms / advisers / DFMs / asset managers all compete to offer the same services?
My bet is that we are on the cusp of profound industry restructuring and, 'yes', there will be competition for the client relationship. But, it will be just that the titles that change and perhaps a redefinition of retailers vs wholesalers.
http://www.ftadviser.com/2012/07/30/investments/discretionary-management/diy-model-portfolios-on-the-increase-sEln4mWA1K6h0Hp7AiVLdM/article.html
Are we entering an era in which there is going to be a desperate competition for securing the relationship with the client? Will platforms / advisers / DFMs / asset managers all compete to offer the same services?
My bet is that we are on the cusp of profound industry restructuring and, 'yes', there will be competition for the client relationship. But, it will be just that the titles that change and perhaps a redefinition of retailers vs wholesalers.
http://www.ftadviser.com/2012/07/30/investments/discretionary-management/diy-model-portfolios-on-the-increase-sEln4mWA1K6h0Hp7AiVLdM/article.html
‘DIY’ model portfolios on the increase
Advisers opting to use ‘DIY’ discretionary management rather than handing business to discretionary and fund of funds managers.
Advisers are increasingly doing away with the need to
outsource their investment management activities to a fund of funds or
discretionary manager, by launching their own ‘DIY’ model portfolios.
The latest data shows advisers are flocking to opening DIY portfolios as a way of grouping clients into easily managed, fee-based structures. This enables them to continue to run investments even as the RDR comes into force next year and bans them from receiving commission payments.
Platform giant Fidelity FundsNetwork said more than 280 adviser firms have started using the firm’s new adviser-managed model portfolio service since it launched in October.
Model portfolios are effectively lists that dictate ideal investment portfolios for groups of clients with particular requirements based on their appetite for risk. Many platforms now enable automatic rebalancing of clients’ assets to reflect the changing model portfolios.
Paul Richards, head of sales at FundsNetwork, said there had been a “steady increase in demand” for the DIY portfolio service, adding that many adviser firms were now using it as a “core part of their investment proposition”.
Kim Barrett, senior partner at Barretts Financial Solutions, is running DIY portfolios hosted on the Transact platform.
He said advisers who are outsourcing investments to third parties could risk losing grip of their clients.
“If you are outsourcing then the client will eventually ask themselves why they need you,” Mr Barrett said. “It is such an obvious question but one which will smack advisers around the head if they are not careful.”
Stephen Piper, chief executive of Surrey-based Homecroft Wealth, has also opted for DIY portfolios - he said they gave his clients “more value” than they could get with a discretionary or fund of funds manager.
He added that many advisers were naturally concerned that
they could fall foul of the FSA’s enhanced RDR requirements if they
continue to try to advise on investments in any way - but these fears
are overplayed.
Nick Bamford, chartered financial planner at Informed Choice, said DIY model portfolios enable advisers to retain value in their businesses - they can “give confidence, educate and reassure” clients about the investment process.
Mike Morrow, sales and marketing director at Ascentric, said half of the month-on-month flows go to model portfolios, with half of that going to adviser-contructed models, but he had not seen a recent significant surge.
“But models generally are continuing to grow as the choice of investment proposition as people look to tidy up their investment proposition before RDR,” he said.
The latest data shows advisers are flocking to opening DIY portfolios as a way of grouping clients into easily managed, fee-based structures. This enables them to continue to run investments even as the RDR comes into force next year and bans them from receiving commission payments.
Platform giant Fidelity FundsNetwork said more than 280 adviser firms have started using the firm’s new adviser-managed model portfolio service since it launched in October.
Model portfolios are effectively lists that dictate ideal investment portfolios for groups of clients with particular requirements based on their appetite for risk. Many platforms now enable automatic rebalancing of clients’ assets to reflect the changing model portfolios.
Paul Richards, head of sales at FundsNetwork, said there had been a “steady increase in demand” for the DIY portfolio service, adding that many adviser firms were now using it as a “core part of their investment proposition”.
Kim Barrett, senior partner at Barretts Financial Solutions, is running DIY portfolios hosted on the Transact platform.
He said advisers who are outsourcing investments to third parties could risk losing grip of their clients.
“If you are outsourcing then the client will eventually ask themselves why they need you,” Mr Barrett said. “It is such an obvious question but one which will smack advisers around the head if they are not careful.”
Stephen Piper, chief executive of Surrey-based Homecroft Wealth, has also opted for DIY portfolios - he said they gave his clients “more value” than they could get with a discretionary or fund of funds manager.
More
Nick Bamford, chartered financial planner at Informed Choice, said DIY model portfolios enable advisers to retain value in their businesses - they can “give confidence, educate and reassure” clients about the investment process.
Mike Morrow, sales and marketing director at Ascentric, said half of the month-on-month flows go to model portfolios, with half of that going to adviser-contructed models, but he had not seen a recent significant surge.
“But models generally are continuing to grow as the choice of investment proposition as people look to tidy up their investment proposition before RDR,” he said.
A new world coming...
Strangely enough this is part of the blueprint for Financial Simplicity....
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