Multi-asset investing is all the rage. With equities proving disappointing and safe-haven pricing heading towards absurdity, the idea of spreading investments across various entities and countering the cyclical environment is tempting.
There is more than one way to do this. A plethora of multi-asset-branded funds have entered the market in recent years, hoping to capitalise on the RDR-led shift in investment approach as a one-stop-shop for clients. Others have been in the market for years and have worked on a divide-and-conquer basis without naming it as such.
Alternatively, advisers can build a multi-asset portfolio for clients from the ground upwards. This could either be based on a model portfolio or built from scratch for each client, depending on the level of assets and needs of the individual. There is also the in-between approach of outsourcing a client to a discretionary fund manager (DFM) to build the portfolio. But which method is best?
Bespoke build
In financial planning generally, the client is king, and the approach for multi-asset investing is no different. The client’s needs will always dictate the approach taken.
For a client with limited cash to play with, a multi-asset fund is a good way to access a wide range of assets at relatively low cost with a better spread than just shares. As shown in Chart 1, such funds have soared in popularity, although a slight downward trend has been evident in the past two years.
“For the mass audience, multi-asset funds are useful to have because they probably have a lower risk profile than putting your money into equities,” says Sheetal Radia, adviser at Financial Architecture.
One thing advisers – and clients – must accept if choosing a multi-asset fund is that it is a generic product. Rather than it being designed around the client, advisers must decide whether it is the most appropriate product based on the client’s needs and circumstances. “They are not bespoke, they are off-the-shelf,” says Mark Harris, manager of City Financial’s multi-asset funds.
Advisers should look at whether the fund makes sense for the client, he adds, along with considering whether it is a standalone solution or part of an overall strategy. “There is a wide range of needs and requirements,” Mr Harris says. “Whether you use those funds in their entirety or in part or not at all is up to you.”
Running a multi-asset portfolio for a client allows a much greater level of autonomy. Model portfolios can be used and adapted for the client, or can be completely bespoke and built from scratch depending on the client’s requirements.
