Matching an individual to the right product or service can only be a good thing, both for a client and their adviser. But a growing focus on meeting specific requirements in the investment industry has upped the pressure on providers – and intermediaries – to expand what they can offer.
This is particularly true in the discretionary fund management (DFM) space, where providers have been striving to offer a wider range of propositions, including more niche products, in response to industry shifts.
“We are getting more segregation in the market itself, so you need to have the offerings in place,” Simon Cooper, head of business development at Cazenove’s DFM team, told advisers at a Money Management breakfast briefing last month. “Advisers [previously] wanted us for bespoke, but now they want us for the whole client suite. They want us from £1,000 upwards.”
Specialist offerings, such as tax-focused portfolios, have also been an area of interest. Some in the wealth space have launched products focusing on the Aim market, in part due to tax considerations, as well as inheritance tax offerings. But as the range of products on offer becomes more diverse, bespoke portfolios are starting to fall into line with their more standardised peers in one particular aspect.
Mr Cooper added: “Some risk-rating companies are looking at rating our bespoke portfolios, which I think is a good thing. There are some that won’t be too relevant, but we are trying to find a way. That’s where tech is playing a large part, because our data feeds from our back office [are improving].”
Kerry Nelson, managing director at Nexus IFA, said the firm measured its own bespoke portfolios along these lines, but acknowledged that doing so could be “hard” given the idiosyncratic nature of individual portfolios. Such developments underline the delicate balancing act of addressing clients’ specific needs while maintaining the ability to manage money across the business.
Ms Nelson said: “You will have the mainstream solutions and then a small minority [of clients] that go off piste. The point of having things streamlined is for the efficiency of the business, otherwise you end up compromising too much and that has a snowball effect.”
Many assert the proliferation of different services represents a positive development, because it will prevent clients from using the wrong products.
“The thing about choice is you can avoid shoehorning,” Fraser Donaldson, of research provider Defaqto, explained. “You can look at DFM portfolios almost like funds and say, ‘I want the best risk-rated five [portfolios]’.”
Some advisers have grown concerned about funds moving between different risk grades, but Mr Cooper said the likes of the “traffic light” early warning system operated by Distribution Technology should provide reassurance that there would not be dramatic movements between ratings. “We try not to make portfolios drop in and out of different numbers, but we run money the way we want. And so far we have been slap bang in the middle of the ranges,” he said.
DFMs and the services they offer have multiplied in recent years, in part because of the demand triggered by the RDR. Defaqto now covers more than 100 discretionary firms and 1,450 model portfolio service (MPS) options.