Investing directly
John Bellamy, managing director and head of adviser solutions at Waverton, says the investment manager’s position is that a well-designed proposition accesses investments directly.
One of the benefits of such an approach, he says, is that one area of the portfolio will not be looking to sell a certain risk while others are looking to buy, which is a possible situation between different funds.
Direct management also enables more sophisticated products, such as derivatives, to be used for downside protection, hedging or to take a view on areas like inflation or interest rate expectations, he adds.
Indeed, many funds are restricted to investing in equities and bonds, but Bellamy highlights investments outside traditional asset classes.
“2022 so far has proved that there are times when the price of both bonds and equities will go down at the same time, whereas the value in some areas of the alternatives markets have been more robust.”
As well as growth in the MPS market, there has been evolution in the platform industry over the past few years, notes Atkin, in terms of the number of platforms available and competitive charging structures.
Once an advice firm has found a discretionary fund manager that it is comfortable with outsourcing their CIP to, Jason Day, a senior investment manager in the discretionary team at Abrdn, says the MPS provider’s ability to manage assets on the firm’s existing platforms is important in enabling a seamless transition for existing clients.
Indeed, decisions on platform and MPS use are not independent and both can drive each other, says Richard Bradley, research director at consultancy Platforum.
“Advisers tend to regard the choice of investment proposition as more important than the choice of platform, especially if they are running a firm-wide CIP, but platform assets are stickier.
“Advisers are generally running business on between one and three favoured platforms, and these platforms would constrain the choice of investment solution.
“Advisers would be reluctant to switch clients en masse from one platform to another, so if they were looking to change investment proposition, it would need to be available on their existing platforms.”
Accordingly, Antony Webb, deputy head of managed portfolio services for Quilter Cheviot, describes a successful model solution as one that accommodates distribution channels into its design.
And when it comes to running model portfolios across multiple platforms, one of the challenges that Webb cites is implementing changes to portfolios across more than one platform.
“[This] requires significant operational resource, meaning minor adjustments to positions are not worthwhile. Overall, this limits the tactical dynamism of model portfolios on platforms.”
