Podcast  

Lifestrategy at 10: What impact has it had on advice?

Lifestrategy at 10: What impact has it had on advice?

Vanguard's Lifestrategy range has been the "easy option" for advisers over the past decade, but that might not continue to be the case, according to guests on the latest edition of the FTAdviser Podcast.

Speaking on the podcast, Graham Bentley said strong performance and low cost of the Lifestrategy range had made it an easy option for many advisers to include in their proposition - allowing them to use it as a simple 'one stop shop' for some clients.

But he cautioned that the Lifestrategy asset allocation might mean some advisers have to give more thought to the range - citing in particular its heavy exposure to the US and the UK

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Bentley said: "When you add those [exposures] together from an equity portion that's basically saying you've got 80 per cent of your money in the US and UK and almost being ignorant of the rest of the world. Now if you compare that with, say, Distribution Technology or any number of other asset allocation models that clients use, that is very different from what they are using.

"So I can see a dichotomy with people using centralised investment propositions that use those external asset allocation models having to explain why it is that the clients that they put into Lifestrategy have got very different allocations and very different sets of risks than what they are seeing in their model portfolio services, and I do think there is a significant number of advisers who haven't squared that circle."

Mike Barrett, consulting director at the Lang Cat, agreed, saying the scale of Lifestrategy - which now has some £30bn in assets - meant there was need for "an additional level of due diligence and care".

But despite these concerns, he predicted the dominance of the Lifestrategy range would continue - citing the fact Vanguard had been more successful than its competitors in avoiding to present itself as a threat to their clients.

Barrett said: "There is undoubtedly that concern with other providers that 'this provider is marketing directly to my clients, they are going to steal my clients'. You don't hear that with Vanguard - interestingly you don't hear that with Vanguard despite their focus on price and cost, and the importance of cost control.

"All those assets on advised platforms almost certainly you could have the custody, hold it on a platform, cheaper if you moved it directly to Vanguard but there is virtually no concern we hear from advisers about channel conflict, which is polar opposite to other providers I could mention."

Responding to the points Bentley and Barrett made about Lifestrategy's asset allocation, Vanguard said there was often "a lot of noise" around this issue.

Neil Cowell, Vanguard's UK distribution head, said: "I’ve been at Vanguard 10 years and in my time here it is very regular that you hear 'look at that quarter's performance' or 'interest rates are only going to go one way'.