Online services are a must-have

29 May 2015

Fraser Donaldson – Insight Analyst (Investments)

At first glance it seems a bit counter-intuitive that financial advisers are handing over their clients' portfolios to discretionary managers and yet want to know as much about what's going on, almost on a day-to-day basis, as perhaps they did before they outsourced.

Adviser research insights

One of the more curious pieces of information that we have picked up from users of Defaqto Engage is that one of the most used selection criteria is the requirement for the discretionary manager to provide online valuations and transaction histories of client portfolios, and provide access to the adviser.

So, it's not cost, not flexibility, not accessibility. Visibility is key – ensuring oversight on behalf of the client.

Changing adviser requirements

Perhaps this need for visibility is not as unusual as it first seems. Over the past five years or so advisers, in the main, have been morphing from investment advisers into financial planners. And more and more are outsourcing their client’s investments to third parties such as discretionary managers.

First and foremost, advisers increasingly charge fees for the process of recommending investments to clients, and then implementing and monitoring the solution thereafter. Part of the service they charge for is ensuring that the investment manager continues to run client portfolios to mandate and that the results remain on course with the desired client outcomes. Therefore easy access to current portfolio valuations and keeping tabs on what transactions the discretionary manager is actioning are very important.

Discretionary managers respond

Many discretionary firms are upgrading and enhancing their online service offerings, giving advisers access to current valuations 24/7. They understand that it's no longer good enough to have an online facility where valuations can be requested even if they can be returned relatively quickly.

Advisers need to be able to call up current valuations and associated transactions at client meetings at any time.

While real-time valuations are still quite rare, we would suggest that close-of-business values the day before are perfectly acceptable – investment horizons tend to be five years plus.

It's worth checking with discretionary firms during due diligence what the frequency of their valuation updates is. We have come across firms that say they provide online valuations and transaction details only to find that they are updated quarterly! There's nothing wrong with this, but it may not be what you expected.

Access to the online facilities is usually provided to clients. It's a matter of importance to provide this to advisers to help them enhance the value of their advice.

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