Multi Asset June 2017  

How to use multi-asset funds at different life stages

This article is part of
Guide to multi-asset investments

How to use multi-asset funds at different life stages

Many of the multi-asset fund ranges available to UK retail investors are aimed at investors at different stages of their lives.

In this way, multi-asset has come to be suitable for advisers with clients who are just starting out investing their money, all the way through to those who are about to retire and want to fund their later years.

While multi-asset solutions will certainly not be the right answer for all an advisers’ clients, they can suit people with a variety of needs and investment goals.

In fact, establishing these goals and how the client wants to achieve them is a crucial first step in the adviser/client relationship, as is understanding the level of risk a client is willing to take to get their desired returns.

Determining risk

Jason Dewar, head of funds research at Distribution Technology, says: “A customer’s risk profile report is important for a number of reasons. Initially it will determine if the customer is willing and able to take any risk at all. 

“Assuming that the customer can accept losses it will then illustrate the possible range of outcomes for a given level of risk. At this point the customer and adviser can discuss whether this is acceptable, or whether the customer needs to consider other options in order to meet their investment goals.”

He suggests this could include investing a higher amount, accepting a longer investment term or even a higher level of risk.

“Once the level of risk has been agreed, the adviser can suggest investment funds that match the risk profile. This could be a single risk profiled or risk targeted multi-asset fund or a portfolio of single asset funds,” he concludes.

The backdrop against which a client is investing may also play on their minds when it comes to selecting the right multi-asset fund for their portfolio.

Royal London Asset Management (Rlam) surveyed 101 wholesale and institutional clients at its annual investment conference, revealing politics and political risk is top of their investment concerns in 2017, while 26 per cent cited rising inflation and interest rates as the biggest threat to investors.

In terms of the asset classes clients are likely to favour over the next 12 months based on those potential threats, 58 per cent of those surveyed selected equities, while a further 16 per cent chose commodities. 

Nearly one in five cited cash and absolute return strategies as their favoured asset class.

Far and wide

For those clients dipping their toes into investing for the first time, picking a single asset class in which to invest a chunk of their hard earned savings can be tricky.

Of course, any good financial adviser will help their clients make these types of decisions.

But by investing across a range of asset classes, first-time investors can spread the level of risk they are willing to take while they familiarise themselves with the vagaries of the stockmarkets.