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Elston Quarterly Portfolio Update Q2 2024
In this video, Portfolio Manager David Seager provides his perspective on the key questions discussed in the recent quarterly asset allocation meeting. Read more
13th October 2023 - Asset Management
This article was originally published on Northonline.com.au on October 12th, 2023
Mark Smith is the Head of Adviser Services at Elston Asset Management, one of Australia’s leading investment management firms specialising in managed account solutions.
We caught up with Mark and asked him how advisers should go about making the transition to managed portfolios.
What should advisers consider when starting out on their managed portfolio journey?
I‘d recommend asking five key questions.
You need to take your whole practice on the journey. Often the move is driven by one or two advocates, but it’s important everyone, including support staff, understands how this new approach will benefit clients and the practice. Otherwise, you’re likely to get resistance to change, inertia and slower take up.
Also, advisers building their own managed portfolio via platform SMAs often overlook the fact it’s a new investment product with its own performance track record. With heightened regulatory scrutiny, we expect to see increased pressure from Trustees if the portfolios fail to deliver their set investment objectives.
Although advisers usually start saving time straightaway through reduced ROAs, portfolio management and improved reporting, it’s generally the first yearly review cycle when benefits start to show.
Industry research shows advisers can generally save up to 15 hours a week by adopting managed portfolios although it can vary depending on factors such as advice technology and investment management approach.
Successful practices put a lot of work into educating clients around features and benefits alongside the risks. We work with practices who use educational videos to explain not only the concept of managed portfolios but also the role of external investment managers.
Some advisers like to introduce the concept in meetings or newsletters, before expanding in more formal annual reviews. Others use a more focused approach over a shorter timeframe. It really depends on what works best for you and your clients.
Keep it simple and explain what’s in it for them. Too often our industry focuses on the benefits for advisers, but there are some fantastic potential client benefits:
I like using the metaphor of mobile phone technology. Twenty years ago, everybody had Nokia 3310s, which were great – long battery life, almost indestructible and the ability to call and send SMS messages. Nowadays, we all have smart phones which can do all of that plus video call a person on the other side of the planet, monitor your health, play music and videos, and do internet banking.
Managed portfolios are similar to smart phones – they’re an evolution in investment technology, designed to deliver an improved experience for investors and their advisers.
One of the biggest challenges is managing the positioning, particularly if you’ve been more focused on investment than strategic advice. Rather than see it as handing over the keys to the car, successful advisers are embracing the role of Chief Investment Officer for their clients, working closely with external investment experts to bring an institutional level of investment management to their retail practice. Access to an experienced managed portfolio specialist BDM is also invaluable, particularly for sharing best practice and helping you negotiate any speedhumps and roadblocks.
Although they’re a fantastic investment vehicle, managed portfolios aren’t a ‘silver bullet’ that will solve every challenge in your practice. But if implemented successfully they’ll add value in terms of client engagement, investment efficiency and hopefully improved investment outcomes.
If you would like more information, please call 1300 ELSTON or contact us.
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