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Portfolio management choices – which way do you go?

  • By Jason Stockwell

Whether it’s in-house, outsourced or a combination of both, this month our IFA Magazine special focus looks at the different approaches to investment management within financial planning firms


When it comes to managing clients’ investment portfolios, there is a certainly a plethora of choices available to advisers, planners and paraplanners. In this month’s edition of IFA Magazine, we’re lifting the lid on this particular topic which is so important within the financial planning process. Don’t worry – we’re not trying to take you right back to basics here. Instead, we have tried to gather opinions, ideas and practical tips from a number of different people and firms in the financial advice spectrum. In our Adviser Case Studies, we’ve asked financial planning firms what works for them and why when it comes to investment management. Of course, that’s not to say that what is right for them is right for you. The truth is far from it.

So what are the options? Advisory or discretionary? In house or outsourced? Model portfolios or bespoke? Multi-fund, multi-manager or multi-asset? You know the drill here – you don’t need us to remind you.

But which of these is the right approach for your client and your business? In the same way that every client is an individual, every single financial planning firm will be different and have different needs and priorities depending on their resources and the type of service which they are trying to deliver for clients. A one-size fits all approach to investment is no longer appropriate. The need to make sure that the appropriate solution is recommended to each individual client based on their needs and objectives, means that whichever ever route you take, an effective due diligence process is crucial.

Whatever the investment approach that you are using at the moment, there is always the need to review and consider how that service can be more efficient, effective and as good as it possibly can be for the client.

If you’re managing portfolios in-house, the research and analysis function is critical, as is effective risk management and clarity of objectives. As well as this, there are regulatory and cost issues to consider and matters of resources too –do you have the right team in place to efficiently and effectively carry out all aspects of the process? If you have discretionary powers, this escalates still further. What are the risks to the business if things don’t quite go as you would hope? So far we’ve asked lots of questions, but not given many answers.

Due diligence matters

Whether you are doing research on funds as part of your in-house portfolio management process, or on third-party services you may be considering using as an outsourced solution, it isn’t enough to gather all the information available and accept it at face value. Marketing literature needs particular care. When extending it to any independent validation of the information, this too needs to be considered thoroughly. Any third party endorsement is helpful, but it is important to understand the basis on which the endorsement was given and the credentials of anyone making judgements.

Carrying out effective due diligence requires strong research and analytical skills, coupled with the ability to question all of the information and the determination to keep on checking until everything stacks up. It also means that gathering and recording information that forms part of the research and analysis you carry out must also be done diligently and thoroughly.

Having a robust process that can be applied across the business, irrespective of what investment approach you take, can make a significant contribution to the lowering of overall business risk.

It remains for me to thank all our contributors for their views, opinions and insight. I hope you find our miniseries of interest and of use and that somewhere within it, you’ll find something which will make you think or give you an idea that you can take away and apply within your own business.

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