Protecting portfolios in a perfectionist world model

Colin Parkin

Colin Parkin

I do think that it is too early to tell what effect the Trump presidency and the Brexit model will have on the global economy over the next year or two. Managers are still trying to come to terms with what it all means.

I do personally believe that the UK investment market will grow from now until say 2020 and I do believe the assets under management will consolidate around £220 billion. This figure will have almost doubled from five years previously. 

Over the last few years we have seen many multi asset investment funds hit the wholesale and retail markets. Many of them are badged as diversified growth funds. The reason for the popularity of the multi asset strategy is simple.

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There are many more ways to invest and manage money in less volatile ways.

However, things will become more complicated because many more funds will occupy this space and I don’t believe that all the asset managers have done a great job in explaining how their funds work and what they are designed to do.

A growing number of advisers are saying to their clients that they would be better served with an outsourced investment manager, but I fail to see how that would be more cost effective if they continue to want to  operate on a 1 per cent charge.

Clients generally are looking for better diversification and multi asset funds offer a broad diversification across many asset classes and regions.

Done correctly this should reduce the risk and give the steadying of returns for those investing for the medium to long term.

The downside to this, however, is that there are more asset types that you can invest in than ever before, but this also means there are more ways to lose money too.

Clients generally need to have a better understanding of how things work and know what they are paying for within their adviser charge.

I don’t believe that you can review a portfolio once a year and provide good advice for the client.

Clients need to be kept informed and need to have a reasonable understanding of how things work generally and I do believe this is getting better.

There are many concerns that can affect the market in general and that will always be the case.

I think the biggest concerns at the moment are if the eurozone fails, the US economy crashes within the first six months of the Trump administration and the third major factor is what will be the cost on the UK to exit the EU.

I can't give you the answers on these points, but these are areas that we are discussing with fund managers on a regular basis as we do feel they will influence our investment strategies over the coming years.

Colin Parkin is managing director of Ample Financial Services and member of the Million Dollar Round Table