Taking financial research and investment in-house can lead to better investment outcomes for clients and increased efficiencies and cost savings for advice firms, a panel has discussed.
Speaking at the Professional Planner Advice Practitioner Summit earlier this month, Minchin Moore Private Wealth managing partner Mark Minchin noted that is, however, a multifaceted process with no “best” way of doing it.
“There are key things around asset allocation and tactical versus strategic approaches,” Minchin said.
He added that his firm took an academic approach to building its own internal investment team.
“I put a lot of effort into picking the right stocks, picking the right managers, and implementing the right tactical asset allocation,” Minchin said.
As an adviser, Minchin wanted his advice to be consistently right and wanted to build a framework that would educate clients, which is why he found several benefits of having an internal investment team.
“We have 24 advisers who don’t have to press buttons on portfolios; that’s all done centrally,” Minchin said.
He added that profound efficiencies come from bringing a person with certain skill sets into a dedicated investment team that runs the portfolio.
“They can leverage technology and can get through more portfolio reviews and rebalances in a day than an adviser ever could.”
Resurgence in demand for independent research
There has recently been a resurgence in demand for independent research.
Evergreen Consultants director and founder Angela Ashton said there has been a resurgence in independent research linked to the big banks withdrawing from advice.
The banks were part of the ‘big six’ group of licencees, which included AMP and Insignia – who are, of course, still offering advice. “They just were not funded properly,” she said.
Because of this, Evergreen began partnering with financial advisers to build multi-asset managed accounts on various platforms. They also started offering their own managed accounts on major platforms.
“We didn’t really know about managed accounts when we started, to be honest,” Ashton said.
“I saw a change in the market and some of my peers were charging fees to financial advisory firms who seemed to actually want to pay them.”
Off the back of this observation, she decided to make a similar pursuit.
“I worked out what managed accounts are, and we all went, ‘Wow, that’s the future’,” Ashton said.
“We’ve been on this incredible ride ever since.”
Keeping a wide view
Brandywine Global Investment Management investment director Richard Rauch believes that, when people and businesses make investment decisions, they must understand the macro landscape – especially on the fixed income side.
“You’ve got to get the fundamentals right,” he said. “You’ve also got to get the timing right. You could ignore the timing in certain asset classes, but that’s difficult to do.”
Rauch recommended people and businesses be deliberate about what they are trying to do and what they are not trying to do.
“If you’re trying to be a global macro shop with a broad, global, unconstrained opportunity set like Brandywine Global, you need to do all of this right to be competitive.”
“I’d say the number one thing the function can afford for anyone building out a macro-economic research function is that you can align your research with your investment process perfectly. That’s what Brandywine has done.”
The firm currently analyses growth, inflation, monetary and fiscal policy, debt dynamics, governments, and areas relating to the environment, society, and governance.
“The list goes on and on. It’s a very, very involved process.”
