Platforms Bringing segregated portfolio management to the mass affluent

Transcription

1 Platforms Bringing segregated portfolio management to the mass affluent

2 Lothar Mentel CEO Tatton Investment Management Ltd

3 Learning objective To provide an insight into the influence of changing industry dynamics on investment management with focus on platforms and their benefits

4 Contents 1. Changing dynamics in private client investment management 2. Segregated portfolio management: Traditional Wealth Management model vs. On-Platform portfolios 3. Outcome: Level playing field?; confusing charging regimes; but with potential to better serve the mass affluent?

5 Industry dynamics Investment approach From stock picking to asset allocating Regulation: RDR (2011), MiFID II (2018) Expectation of lower returns: Focus on cost effectiveness and transparency Technology: Quantum leap in expectation by future investors

6 WM vs. IFA+Platform+IM similar infrastructure now? Traditional WM Private Banker/CRM Investment manager Back office Value chain Suitability & KYC Portfolio maintenance Execution, Reporting, Custody IFA model Financial Adviser DFM / MPS Platform

7 Portfolio construction Remarkably similar as well? Segregated investment portfolio structure, fund and tracker based However Portfolio Holdings - Tatton Managed Balanced Weight (%) North America Equity 8 Franklin Templeton Funds - US Opportunities Fund 1 HSBC Index Tracker Investment Funds - American Index Fund 6 Wells Fargo Lux Worldwide Fund - US Small Cap Value Fund 1 UK Equity 21 Old Mutual UK Alpha Fund 8 Schroder Recovery Fund 3 ishares UK Equity Index Fund UK 2 Lazard Investment Funds - UK Omega Fund 2 GAM Funds - UK Diversified Fund 2 Dimensional Funds ICVC - United Kingdom Value Fund 4 Europe Equity 12 Baring Europe Select Trust 1 Henderson - European Selected Opportunities Fund 4 JPMorgan Fund ICVC - Europe Dynamic Ex-UK Fund 4 Liontrust European Growth Fund 3 Japan Equity 10 Schroder Tokyo Fund 7 JPMorgan Fund ICVC - Japan Fund 3 Global Emerging Market Equity 3 Dimensional Funds PLC - Emerging Markets Value Fund 2 RWC Funds - RWC Global Emerging Markets Fund 1 Asia Dev ex Japan Equity 2 Fidelity Investment Funds - Asia Fund 2 UK Gilts 5 Vanguard Investment Series PLC - UK Government Bond Index F 5 UK Corporate 9 Vanguard Investment Series PLC - UK Investment Grade Bond In 7 Cheyne Select Ucits Fund plc - Cheyne Global Credit Fund 2 Global Bond 7 Vanguard Investment Series PLC - Global Short Term Bond Index 1 ishares Overseas Corporate Bond Index Fund UK 4 Schroder International Selection Fund - Global Bond 2 Global Inflation-Linked Bonds ex-uk (hedged) 5 Legal & General - Global Inflation Linked Bond Index Fund 5 Alternative 3 AQR Systematic Total Return UCITS Fund 3 Cash 15 Cash 15 Total 100%

8 WM model (Off-platform): 250,000 Portfolio

9 IFA platform DFM model: 250,000 Portfolio

10 Traditional PB/ Wealth Manager IFA - Platform - DFM Differing minimum revenue needs lead to differing minimum investment

11 Portfolio construction platform pros & cons Pros Modern technology effectiveness for large numbers Due diligence undertaken by platform for investable universe Effective cash management proportional encashments Low investment minimums, sliding scale volume pricing Cons Limited to liquid, regulated investment universe Few with congruent sell and buy execution (DvP) Execution lag of 24-48h

12 21 st Century portfolio access Clients now expect: Anytime/anywhere access to valuations, reports & analysis Financial adviser akin to financial GP with access to specialist consultants Time for analysis and advice, not admin Competitive pricing for the generic value chain elements (Especially when we finally hit those low return years) No barriers to change of arrangements

13 Platforms bring segregated portfolios to mass affluent Cost effective management from 20,000 Transparent portfolios costs, tax position, time weighted r s Reducing admin overheads should narrow advice gap? Investor beware: Potential for too much or too little activity Who needs one of these? -> Asset allocator investors seeking to avoid the layer of multi manager fund fees on fees what comes after platforms?

14 Growing use of online advice support tools Human interface advice will always be demanded. Digital KYC fact-find tools can address unit cost of advice Medical profession already uses such technology: HealthTap 108,000 doctors have answered queries Multiple services for businesses in the app A combination of face-2-face and Robo will help reduce the unit cost of advice *Information on Healthtap in the US/UK can be found:

15 Learning outcomes Regulation and technology create industry dynamics that can lower cost of investment and increase consistency of client outcomes for mass affluent segment Platforms are much more than facilitators of RDR s ad valorem fee charging requirement Intelligent combinations of financial advice, effective investment management and platform execution and custody can address the cost gap that has created the advice gap, while democratizing access to advanced methods of investment management

16 Important Information This document is solely for the use of professionals and is not for general public distribution Tatton Investment Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register number Tatton Investment Management Limited is registered in England and Wales No Registered address: Paradigm House, Brooke Court, Wilmslow, Cheshire, SK9 3ND.