Model portfolio services have proliferated in recent years, as more advisers appreciate the benefits and ease that comes with outsourcing.
But as more and more of these portfolios look the same, how do they get to stand out?
Lucy Mitchell, associate director, Smith & Williamson, looking after its managed portfolio service, says they do this by giving clients access to closed-ended funds.
“There’s a lot of MPS to choose from, and a lot of people differentiate by price or performance. With a lot of portfolios, you can invest across asset classes and regions, but not across investment products.
“[Our] MPS is renowned for investing in open-ended funds, investment companies and passives.”
This means that it does restrict the distribution of their MPS, as not every platform offers the option of investing in investment companies.
But for Mrs Mitchell this is not a major problem as offering access to investment companies allows access to illiquid assets, something that has become a particular issue in recent months.
She says: “People assume when you buy an investment company it’s for equities, but we have alternatives, infrastructure, property and hedge funds.
“These areas struggle with liquidity, and a closed-ended vehicle is good for illiquidity, as it brings liquidity to these areas. This is because they are traded on the stock exchange, and you can trade every day.”
It is a good way of bringing about diversification in a portfolio, she adds.
“We are specifically going on certain fund platforms in order to stick to what we believe in.
“The prime example is property. We’ve seen several occasions where open-ended property funds have had to gate. They are offering daily liquidity in illiquid assets.
“What that means for clients is they can’t get their money, and they can’t rebalance. But people can invest in an investment company because these trade on the stock exchange.”
Smith & Williamson has been going for 140 years, and started out as an accountancy company. Over the years, it has been involved in the administration of several high-profile corporate failures (for example, it is one of the joint administrators of GPC Sipp, which went into administration in June 2019).
Smith & Williamson has since branched out into investment and wealth management. It has £22bn of assets under management, and specialist research teams to find the right asset.
Mrs Mitchell says: “Seven years ago Mickey Morrissey, [the partner of outsourced investment services], decided to focus on having a core team to promote this service.
“One of the things we have got to accept is the IFA market has changed.
“Our bespoke portfolios are for very wealthy clients. What we are doing for the mass market is MPS; these are for people with £20,000 and above who can access the experience of our investment teams at a lower price, although they don’t have the same relationship with a portfolio manager.