Innovation and managed portfolios: a new disruptor?

Improvements in platform technology and functionality are ushering in greater efficiencies and revenue opportunities for advisers.

Innovation and managed portfolios: a new disruptor?

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Last Updated: 13 October 2020 Published: 21 December 2015

A clear trend that has eventuated over the past year is the advantage technological innovation is having for investment solutions, for advisers and their clients, and the changing dynamic between investment managers, advisers and clients since the Future of Financial Advice (FOFA) reforms took effect.

We believe managed portfolios are changing the way advisers manage client investments and will become core to most advice offerings.

The reason being is that they offer many advantages over more traditional product solutions.

The benefit of managed portfolios

Advisers now have access to a broad range of managed portfolios and SMAs from professional fund managers who make investment decisions on the adviser's behalf while their clients maintain the beneficial ownership of the underlying holdings.

When compared to direct selection of individual securities, managed portfolios potentially offer lower administrative costs for clients, and a reduced compliance burden for advisers.

Managed portfolios can also offer greater transparency, where underlying assets can be monitored on a day-to-day basis. Furthermore, managed portfolios often provide more cost-effective access to professional management.

Taking advantage of new technology 

In this sense, the coupling of newer generation technology with managed portfolios is having a disruptive effect within the wealth space.

While change can be a disruption to business, the good news is that innovation within the industry is helping advisers to gain greater efficiencies as well as advance their position in the value chain.

Many financial planning practices are starting to consider new or alternative business models as they look to manage costs and replace lost revenue. Additionally, in today's post-FOFA reform environment, clients want more transparency around where their money is going, and they want control in the decision-making process.

Technological advancements, and further innovation of managed portfolios, are helping advisers maximise revenue opportunities and tax efficiencies.

Finding a platform that is easy to use in addition to offering an unbiased menu is the Holy Grail for some advisers, and this dynamic is unlikely to abate as the advice industry polarises around independence or institutional alignment.

Platforms will be key in the supporting the proposition of each segment, and indeed may serve to accelerate that movement.

As clients demand more engagement and control of their investments, it is critical that platform technology supports tools and products to assist advisers meet that challenge, while enabling greater efficiency and value creation.

Wes Gillett is the head of marketing and distribution at HUB24.