Introducing Smith & Williamson’s Managed Portfolio Service

Smith & Williamson has been advising private clients and their families since it was established in 1881 and now has around £20.4bn of funds under management and advice (as at 31 December 2017).

As the outsourcing of investment management by advisers continues to increase, we are confident that our range of six risk profiled models with a blend of investment companies, open ended funds and passive investments will be popular with financial advisers.

In September 2012 we launched the Managed Portfolio Service (MPS) for financial advisers and their clients, and designed it to include open ended funds, Exchange Traded Funds (ETFs) and investment companies, which provides the service with a point of difference in the market.

With five and a half years of performance track record and six models available, we are delighted to be working with Synaptic Risk which will give advisers access to our six Synaptic risk profiled models ranging from Defensive to Dynamic Growth.

As the outsourcing of investment management by advisers continues to increase, we are confident that our range of six risk profiled models with a blend of investment companies, open ended funds and passive investments will be popular with financial advisers. I hope you find our article on the benefits of segmentation for financial advisers interesting and enlightening.

Taking a long-term approach: Finding a profitable alternative to dismissing 'unprofitable' clients

Complying with regulation and responding to other factors are continuing to have an impact on financial advisers' operating costs. Some are therefore making radical changes to their businesses in an attempt to remain profitable.

Faced with higher costs as they grapple with regulation, one obvious temptation for advisory firms is to take a hard and fast look at their client books and speedily dismiss those who don't meet minimum requirements. The bar is steadily rising in this respect, with anecdotal evidence from across the market suggesting that even investors with portfolios of less than £70,000 or £100,000 – no small amount by any means – are being told to make alternative arrangements.

Specialisation is, of course, a perfectly acceptable and indeed sensible strategy for advisory firms, but taking such an approach could turn out to be short-sighted in the longer term if not considered carefully. Clients who may today seem low value on paper may in the future prove to be big fee earners as their financial planning needs become more complex.

The worry is that if advisory firms give investors their marching orders now, they may unintentionally be providing referrals to their closest competitors or robo advisers which could prove lucrative in the longer term. If advisers dismiss those clients now, the earning potential from that individual may be lost forever.

Forward-thinking advisory firms are increasingly discovering that segmentation provides a way for them to manage their resources effectively and ensure they remain profitable in both the short and long term. As clients' lives evolve and their ability and willingness to pay higher levels of fees change, then a firm can alter the level of service provided accordingly.

Whether an investment proposition is delivered in-house or is outsourced can make a considerable difference to the cost of providing a service to clients. Yes, there are merits in offering a bespoke investment service, but it requires a considerable amount of an adviser's time when you consider all the research that needs to be undertaken to satisfy suitability requirements. And, given costs are on the rise for firms, this is not necessarily viable if clients don't have a sizeable amount to invest.

If advisory firms effectively segment their client banks, intermediaries will find it is not difficult to profitably service many of their lower net worth clients through a managed portfolio service, accessed through an investment platform. For traditional balanced growth clients without any capital gains issues, outsourcing to an investment manager in this way could be ideal.

By using a managed portfolio service for lower net worth clients, intermediaries will have more time to spend with their higher net worth clients and those with more complex financial planning requirements.

Advisers can't control the costs of regulation, but they are in charge of their own destinies when it comes to other elements of their business. How investment services are delivered can make the difference between an investor being profitable and unprofitable, both now and in the future. Firms should make effective use of technology, adopt segmentation techniques and outsource where appropriate, but perhaps most importantly they must make sure they don't lose forever the clients that will be important to their business in the years to come.

Smith & Williamson model portfolios asset allocation

Smith & Williamson model portfolios asset allocation

Source: Smith & Williamson Investment Management and StatPro as at 31.12.17

Smith & Williamson is an independently owned financial and professional services group. The firm is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices, entrepreneurs and mid-to-large corporates. The group’s c1,700 people operate from a network of twelve offices: London, Belfast, Birmingham, Bristol, Cheltenham, Dublin (City and Sandyford), Glasgow, Guildford, Jersey, Salisbury and Southampton.

Smith & Williamson Investment Management LLP is part of the Smith & Williamson group. Smith & Williamson Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Smith & Williamson Investment Services Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Risk warning

Investment does involve risk. The value of investments and the income from them can go down as well as up. The investor may not receive back, in total, the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable.

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.