Searching for the right platform

“Can you supply me with a platform branded and bespoked to my firm’s specific requirements?”

Scalability

And here, at last, is the big question. How to meet the investment management demands of your firm and clients is without doubt the biggest question a progressive firm has to face. Ultimately this decision will determine almost everything else – compliance risk, administration burden, staffing levels, recurrent revenue and business value.

Whether your chosen investment management process includes in-house investment management, partial outsourcing through, say, multi-manager funds, or fully outsourced, your investment process must be consistent, TCF compliant and scaleable.

Scalability is a vital point and too often overlooked.

Some early adopters of the platform business model are now hitting capacity constraints, mostly obviously with pre-defined or model portfolios. The ability to apply a model portfolio to a client categorised within a certain level of risk is one of the biggest advantages of using a platform.

Problems arise when client numbers increase. It is hard, if not impossible, to ensure that all clients receive a consistent portfolio and therefore achieve the same approximate returns for any given level of risk. This is because of two reasons, one that, bluntly, many advisers are not experienced with the disciplines of modelled investment management and recommendations change for new clients without the same trades being effected for old, and two, that with an advisory mandate client permission is required before executing a fund switch.

There is little point in moving to a new business process which fails the test of scalability, so here’s a last question, not for the platform but for you: “Could this platform enable me to consistently apply my firm’s investment process to large numbers of clients?”

Richard Mein is managing partner at Parmenion Capital Partners