Multi-Asset Focus  

How to outsource within a multi-asset solution

How to outsource within a multi-asset solution

Advisers have myriad demands on their time – meeting and talking to clients, keeping up with regulatory reforms and requirements, as well as maintaining client investments.

For many years now, multi-asset funds and solutions have been marketed as a way to ensure clients are diversified across asset classes, while taking the burden of financial decision-making off the adviser’s shoulders.

Given the chance to outsource to a multi-asset fund, many advisers will, understandably, do so.

Gary Potter, co-head of the multi-manager team at BMO Global Asset Management, observes: “The job of any financial adviser is an increasingly complex and time consuming one and the investment component is just one facet of their growing responsibility towards a client. 

“The growing regulatory and reporting requirements alongside an increasingly sophisticated and informed general public, allied to the complexities of today’s modern investment world, in a changing tax world regarding pensions, generally argues in favour of outsourcing the specialist component parts of financial planning to experts in various fields.”

As Meike Bliebenicht, senior product specialist, multi-asset at HSBC Global Asset Management, points out, advisers’ strengths often lie in handling client relationships.

“They establish the level of risk their clients are both willing and able to take with their portfolio. From this, a suitable asset allocation needs to be constructed to provide a portfolio of investments which meet the investor’s objectives, while remaining in line with the chosen risk profile,” she says.

“One option would be for the adviser to construct this asset allocation and then fulfil it with a range of funds covering each asset class.

“Alternatively, multi-asset funds provide advisers with a solution with which they can meet their investors’ needs,” Ms Bliebenicht suggests.

Time well spent

An adviser’s time is sometimes best spent with clients, helping them with their advice needs, agrees Kevin Doran, chief investment officer at AJ Bell.

It is not only the increasing length of advisers’ to-do lists which mean they can often benefit from being able to outsource, but also the economic backdrop.

While a decade or more ago advisers may well have been able to simply construct a fund consisting of equities and bonds to provide decent returns, this approach in the current environment often will not suffice.

Andrew Harman, senior portfolio manager, multi-asset solutions at First State Investments, notes: “The current low yield environment challenges investors’ reliance on traditional asset classes, such as equities and bonds, to provide sufficient returns to meet their investment goals. 

“People are increasingly looking for products that can give them the required level of return, while balancing risk and preserving capital.”

But he concedes that simply holding a large number of asset categories does not provide real diversification.