BT Financial Group is developing a new risk profiling tool, rationalising its model portfolio range and, via changes to BT Wrap, introducing a dealer-group model framework which will reduce the administrative burden on financial planners using model portfolios.
The package of changes is designed to allow advisers to focus more closely on providing holistic advice and effective client strategies, and to develop deeper client rlationships.
Piers Bolger, head of research and strategy, advice and private banks, at BT Financial Group, says the new dealer group models approach will be rolled out to the Westpac Financial Planning, Securitor and Magnitude licensees in coming months. Between them these licensees have about 1500 individual advisers.
“One of the areas we’re doing a lot of work at the moment is around risk profiling,” Bolger says.
“We’re building out a brand new risk-profiling tool and we’re doing a pilot program at the moment for a broader launch early in the new year.
“That’s really important, because there’s probably been a disconnect in the industry between risk profiling and the outcome to the client – we are trying to ‘tighten’ that aspect.
“We’ve certainly taken on board feedback from the adviser community, that we need a better way to identify, and to better articulate for our clients, the types of risks and opportunities that investment markets present, and how that can evolve into an overall investment portfolio solution.”
Reduce complexity
Bolger says the rationalisation of the model portfolios will reduce the complexity of choices facing advisers, but continue to be flexible enough for them to tailor investment solutions to meet client needs. He says the model portfolio range will be rationalised from from 35 to about a dozen.
“People do not need as many tailored solutions as they think they do,” Bolger says.
“In that context, it’s about managing expectations around them. If you look at really good advice businesses, they have maybe only three to five core strategies that they manage for their entire client base, rather than saying, I’ve got 200 clients so I’ve got 200 different portfolios and depending on which manager I like this month, that’s the one that gets the dough.”
“The way we look at it, if you really define those strategies well, you’ve got a pretty broad mix of clients that you can target to. And additionally an adviser may have two strategies operating in the one overall portfolio, creating the ability for the adviser to ‘bucket’ or ‘silo’ a strategy, dependent upon what the client needs.
“That provides eminent flexibility.
“Then we’ve got one dedicated [strategy], which is our objective-based income [strategy], which is solely around providing income. Through time we may look to add further strategies, but they need to have a rationale for being.”
Refocus on relationship building
Bolger says the rationalised structure will enable advisers to have a clearer understanding of how BT can provide strategic support to their businesses and clients.
“You go away from saying, ‘I picked a really good fund’, or, ‘I picked a really good stock’, to thinking about the overall strategy and the solution – constructing portfolios designed to deliver to an outcome, not just a mix of funds or products,” he says.
“It doesn’t mean it’s a set and forget; it’s anything but. But it’s important to focus on the overall portfolio, not just the individual component parts. You let [the research team] do that…while the adviser can focus on the overall client strategy.
“As [the client’s needs] change, then you make changes holistically to the structure; but you let [the research team] make changes to the model portfolio in order to continue to deliver.”
Bolger says advisers should be seeking to fully exploit “the depth of resources at their disposal”.
“They can say to the client: ‘I’ve got 17 people behind me, with an average of 11-plus years’ investment experience [each], all specialists in their field doing this, and they do it every day in an un-biased manner; we’ve had a discussion as to what your needs are, and what your risk tolerance is, and we think this is a strategy that will lead you to achieve the right outcome’.”
Bolger says the benefit for the adviser is being able to maintain “a strong and transparent relationship [with the client], while seeking the specialist investment skills that he and his team can deliver, while using the broader administrative and operational strength of the group”.
