Is your Tailored Model Portfolio Solution delivering value?
Author: Paul Hogg, 8AM Global
Advisers have been using Bespoke or Tailored Model Portfolio Services (TMPS) for a number of years.
The implementation of Consumer Duty 2022 further emphasised the need for advisers to focus on the areas where they delivered value to clients – as expert Financial Planners, rather than investment professionals. A tailored MPS is often to be the first stage for advisers on their journey to outsource investment management to specialists. Tailored model portfolios allow financial advisers to align key aspects of their own investment philosophy and process with that of a trusted investment manager partner.
A TMPS partner can work with the financial adviser to design custom strategies and benchmarks for performance and risk analysis, to best align with the values and needs of specific client segments.
More recently it appears that some of the tailored services on offer are no longer as ‘bespoke’ as advisers would prefer. What pitfalls should advisers look for in their current solution?
Customisation and Context
- Over-Customisation: Excessive tailoring can lead to inefficient diversification, increased complexity, and potential underperformance. Constraints, such as strict ESG or geographic preferences, can further limit effective asset allocation.
- Under-Customisation: On the other hand, some DFMs may gradually shift towards standardising portfolios across firms, reducing the level of personalisation advisers originally intended. It’s essential to regularly review whether your solution remains aligned to your desired client outcomes.
Avoiding becoming too closely aligned with the asset manager
Some asset management firms, using a variety of means, take a financial interest in the financial adviser business for which they manage a MPS, making it harder, if not impossible, for the adviser to change managers if they aren’t delivering for their clients. By maintaining independence, advisers can ensure they continue to offer the best solutions for clients over time with no potential conflicts of interest.
Co-branding considerations
While co-branded solutions can be valuable, advisers must ensure that they are implemented in a way that maintains independence and prioritises client value, rather than a simple branding exercise. When done correctly, firms can highlight the advantages of a close relationship with a given investment team whilst maintaining the ability to pivot and reassign the mandate if key metrics aren’t met.
Is It time to reassess your partnership?
If your current Tailored MPS is not delivering the level of client value, delivery of service or simply the investment outcomes you envisioned, it may be time to explore alternative providers. We specialise in solutions designed to align with your philosophy while ensuring true flexibility and value for your clients.
Let’s discuss how we can help—contact us today to explore a better approach to tailored portfolio solutions.
If you are considering alternative tailored solution providers, please contact me to discuss how we could help.
This content is intended for financial professionals only. These are the author’s views at the time of writing and may be subject to change. This content is not intended to provide the basis for any investment advice or recommendation. Any forecasts, figures, opinions, tools, strategies, data, or investment techniques are included for information purposes only.
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