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Better Business Value

Roles in The Retail Investments Moving Forward

So change is happening….We are hearing more from client facing groups about how they are going to change the industry dynamic, become investment ‘manufacturers’, pay platforms rather then receive monies from them, and change a lot of the industry from ‘price makers’ to ‘price takers’. What is this going to mean in terms of the roles (and titles) of industry professionals, their firms, and where is the big money (or just survivability) going to be ?

Whilst I suspect there will be variants, in this new world it seems that the key roles may be:

  • Client Advisers – this is all about providing ‘context’ for the client to help them make decisions within. Whilst the people that cant afford to see professionals to provide such may have to go on-line (and there are some great new sites to help them), the ones who can afford such will be paying client advisers for context in conversation. The more complex a client’s situation, the more the challenge to find the right ‘context’, which will most likely include attitude to risk and loss (Thanks Paul !) . Should the client context fit within an advisory firm’s scope, an output from the process of determining context is setting and choosing investment strategy with any accompanying client specific instructions. As value is what is received by the client, not what is given, it is likely that those advisers with the skill and ability to provide real context to clients will be in a sustainable businesses.
  • Asset Allocation and Selection Experts – whether this be working out asset allocations that suit clients attitude to risk and loss, or the selection of individual investments (whether funds, ETFs or stocks), these people are going to be the ones responsible for constructing a variety of model portfolios with ‘target’ or ‘theoretical’ allocations to asset classes or assets.  These are the model portfolios that the advisers choose for their clients. The more sophisticated firms will seek to extend to separating asset class categorisation from specific investment selection as they realise that clients current assets don’t need to be replaced to support a desired asset allocation. People in these roles may use a variety of techniques to determine their selections, may end up being largely quant driven, and may adjust their model portfolios on differing time frames depending on what the purpose of the model portfolio is. Many suspect that these roles will be either salaried in house employees to advisory firms, or perhaps specialist groups who provide such on a contracted service basis.
  • Implementers – these roles are the people in a model portfolio based world that do the manufacturing within client portfolios. Constantly monitoring the changes in drivers of client portfolios (ie market prices, model portfolio constructions, or client rules), this role is responsible for ensuring that (and will be measured by how well) client portfolios track their nominated mandates (model portfolios combined with client specific rules, preferences and constraints) as determined by the clients’ advisers. Good implementers will react quickly to changing market conditions and model portfolios to outperform their competition to leverage the capital markets. Implementers get efficiency of scale by working their client portfolios as an overall book, treating clients fairly and getting economy of scale. Service levels will be the key differentiator followed by price and I suspect that there will be a few high volume providers or enablers (like Financial Simplicity) that will fill or support this space
  • Dealers – these will be the people who attain the results from the market that the implementers deem appropriate for the client portfolios. Dealers are close to the markets and good ones reliably perform by getting results for their clients, whether just in terms of service levels or price efficiency compared to others.
  • Platforms (or Administrator) – these will be the businesses that operate ‘asset containers’ on an outsourced basis for investors and advisory firms, and will be paid service fees as opposed to out of client’s assets. It is shaping up that this area of the industry will be differentiated by ease of access to information, technology integration, range of investments available and service levels first, and then price second as pricing levels will be driven down by high scale operations.
Stuart Holdsworth

Author Stuart Holdsworth

Stuart has over 30 years of experience in the use of technology for the strategic competitive advantage of businesses in the financial markets and investment industry.

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