The move for advisers to outsource portfolio construction is warranted because it is a unique skillset, the Professional Planner Researcher Forum has heard.
Mason Stevens chief investment officer Jacqueline Fernley told the forum in the NSW Blue Mountains that practically speaking, “portfolio construction and delivering multi asset portfolio is a full-time job”.
“If you’re sitting in front of a client, you’re building a book, you’re retaining a book, you’re doing a lot of strategic advice and a lot of paperwork. How on earth are you also meant to be across the suite of managers, the market itself, how they all interconnect.”
She said an adviser who can do both at a high level would be “a superhero”.
“There’s not many CFA qualified advisers. That plus time – an adviser’s role [is] sitting in front of a client, building a book…and doing a lot of strategic advice in the mixture. How on earth are you meant to be across the suite of managers in the market itself?”
Matt Lawler, who officially became NewCo chief executive on Monday after the transition of AMP’s advice arm to Entireti was completed, said many advisers will take on the responsibility of portfolio construction, but there needs to be rigor around it.
“How do we lift the standards of all advisers in the marketplace and be confident that, when we do it, we’re actually producing a better result,” Lawler said.
Fernley agreed, saying “how do we elevate performance to make sure that we’re getting great outcomes for everyday Australians because, in essence, we’re custodians of their family”.
The discussion included about how to monitor every practice and the performance of their portfolios and how to find a system to see how every practice is performing. Lawler asked “what role of monitoring and supervision do we play to make sure that we understand what every practice is doing”.
Having a standardised system to survey how every portfolio is performing and how they’re benchmarking.
“I’d love to see us as a group, work through benchmarking, for example and have a standard because certainly every platform has a different benchmarking approach,” Fernley said. “It would be great to be consistent in that.”
Lonsec chief executive Michael Wright told the panel the additional benefit for model portfolios is around client engagement.
“I actually love the collateral and the conversation I get through my model manager, particularly if it’s about to be a portfolio change, to actually articulate why,” Wright said.
“I’ve owned unitised structures before and yes I may get some quarterly information but it’s much more embedded within their quarterly rhythm.”
Wright noted another key benefit is if the model manager isn’t up to par, the Responsible Entity can sack them. “For me, that’s actually really important.”
Fernley said the platform monitors model managers all the time because they operate under our MDA license*.
“Whilst we’re not an RE it’s no difference with a licensee in the MDA [managed discretionary account] context. We will move our consultants on…usually underperformance or portfolio construction that is inappropriate”.
Another topic brought up during the discussion was the intergenerational wealth transfer and the challenges it might present.
“There’s such an incredible shift of money from an intergenerational wealth transfer that is occurring,” Fernley said.
“For a lot of smaller practices, a lot of the conversations we have is how do you retain that retail client? And then how do I grow my book? How do I service this client or group of clients that are coming to me for support? It’s the biggest growth segment that we can see.”
This article was updated on 5 December to amend quotes by Jacqueline Fernley from Mason Stevens.
