It’s becoming increasingly apparent that it’s a dangerous time in markets for investors. Governments and Central Banks around the world have reacted by pumping in immense amounts of stimulus to maintain price stability. But the more astute observers recognise this is a band-aid, not a permanent solution, and that traditional Risk Profile or SAA portfolios are not designed to navigate, or even survive, the future.
For advisers that use Risk Profiling or SAA portfolios, this has the potential to be the next existential crisis for their clients and their businesses.
If markets and SAA portfolios fail, what is their Plan B? How do advisers generate the returns their clients need to meet their financial goals? If they don’t, is the adviser meeting their client Best Interest Obligations when there are, better, more appropriate forward-looking solutions available in the market? What will falling markets do to advice business revenue, profit and valuations?
Dr Jerome Lander, portfolio manager at Dynamic Asset, summed it up succinctly in his most recent webinar “The New Reality” where he says that:
This forecast is supported by an increasing number of global investment specialists, such as GMO in their most recent 7-year forecasts showing returns from almost all traditional asset classes will be low to negative going forward.
In the face of this increasing mountain of evidence, advisers have a choice. They can continue doing what they have done successfully in the secular falling interest rate environment of the last 30 years, or they can adapt to the new reality. If they don’t adapt, will they go the way of Kodak and other established businesses that refused to accept or understand the changing market paradigms?
The good news is that for astute forward-thinking advisers willing to adapt to this new reality there are ways to mitigate these risks, and even thrive in the new environment, as they distinguish themselves from the rest of the market.
In his webinar, Dr Lander provides advisers with the blueprint. He says that portfolio mandates need to be designed to meet specific goals, not static asset allocations, be they; cashflow, risk management or return-seeking. Portfolios need to be able to use a broad asset allocation range and access different assets than is found on most restricted Approved Product Lists (APL’s).
But it’s not easy. Advisers need the resources, team and skills to be thoughtfully different rather than just track market indices. A well-considered and articulated investment philosophy is required, together with a robust governance framework to protect your business and clients, strong third-party relationships to execute dynamically and efficiently and the technology to deliver at scale. For many advice firms, that is beyond the scope of what they can reasonably achieve by themselves.
A pragmatic option is available to advice firms to use specialised portfolio management service that delivers solutions that account for the new reality.
Dynamic Asset’s client-orientated portfolio designs combined with market-leading execution solutions and portfolio management services are now available for advice firms to use in their businesses. This leverages ten years of research and development by the team at Dynamic together with the portfolio management success Dr Lander has been delivering, with his flagship Wealth Builder portfolio delivering market-leading returns over the last 1, 3 and 5 years.
It is now time to get ahead of the curve and avoid another CFG like fallout for clients and advice businesses. Dynamic Asset is a simple end-to-end turn-key business solution using the framework, systems and processes that have been successfully used by advice firms for over five years. Their whole of business solution covering Wealth and Retail super provides a range of goals-based investment portfolios designed to meet different client needs across changing market conditions and deliver outcomes that will help advisers and their clients thrive in the new reality.
Implementation of this approach is straightforward as it has been built for clients by advisers to use in their advice businesses. In doing so, it builds on the existing strengths of the vast majority of advisers.
At the very least, it would be prudent for advisers to think thought these issues very carefully and have a Plan B ready to go.
To learn more about how the Dynamic Asset adviser solution can work for your business, contact us.