Multi-asset is something of a buzz-word right now. The idea of spreading risk by investing in a selection of assets is tempting during a period of continued uncertainty.
But how do you decide how to do this for your clients? Should you invest in a multi-asset fund or build a multi-asset portfolio? Find out with our top tips.
1. Assess your client’s wealth. A client with a few thousand to play with is unlikely to be suitable for a bespoke portfolio – a multi-asset fund might be a good way for them to get diversification under one roof. For high-net-worth clients, however, building a portfolio yourself will give you greater control.
2. Think about risk profile. A multi-asset fund may be risk-rated, but unless it is risk-targeted, the rating may change. You need to ensure that your client’s risk profile remains matched to the fund. Building a portfolio yourself gives you more parameters to deal with but may give a better overall match.
3. Analyse what assets your client needs. ‘Multi-asset’ is not a one-size-fits-all term; property, for example, may not be suitable in a fund for your client if they have significant personal holdings already. A fund manager will not be looking to specifically match your client’s needs and may alter the holdings at any time.
4. Consider whether you have the right expertise. This largely depends on your business model – do you spend lots of time researching investments, or is that best left to someone else? Knowing the client’s appropriate asset allocation and sitting down to select the appropriate funds do not necessarily have to happen as one; using a DFM may be appropriate to build a bespoke portfolio.
5. Think about costs. If you create bespoke portfolios for multiple clients with similar funds, you may be able to access institutional pricing to bring down the cost. If not, a multi-asset fund may be cheaper overall.
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