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Why the future of wealth management is mass tailored portfolio management

By 12 April 2022October 11th, 2023No Comments

Stuart Holdsworth, CEO & Founder, Financial Simplicity


In today’s ‘it’s all about me’ world, if you want your business to thrive, then the customer must be at the heart of what you do; a concept known as customer-centricity. Consumers have personalised playlists on Spotify, tailored programming on Netflix, and a custom commute with Uber.

The wealth management industry has lagged in providing this level of personalised portfolio management, except for in the case of the very wealthy. Added to this, personalised portfolio management is often complex (because every client is different) and prone to human error.

Mass tailored portfolio management: delivering personalised investment strategies at scale

The key for delivering to those engaged investors who want a mix of professional investment advice and to provide their own input, to “do it with me”, is delivering personalised investment service at scale; a concept I’ve termed mass tailored portfolio management. The concept of mass personalisation is not necessarily new, but in portfolio management it has taken some time to reach the mass market.

Nowadays, investors have access to more investment information and tools than ever before: robo, ETFs, online brokerages, and apps, to name a few. For their business to be sustainable, intermediaries must offer something better than what the investor can do themselves.  More progressive advisers and wealth managers have cottoned on to  this need for a better engagement model that centres around the customer, and it’s even embedded in law (best interests). However, the extent of personalisation varies drastically across the industry.

The shift to client centricity also necessitates business improvements. To be sustainable,  a wealth management business needs to consider  three key tenets: a long term, sustainable, customer value proposition; a long-term, sustainable economic model; and a long-term sustainable operational and regulatory model.

A long-term sustainable customer value proposition

Many Australians see paid financial advice as a service available only to the very wealthy. According to Investment Trends 2021 Financial Advice Report, two in five Australians say advice is out of affordable reach. However, 61 per cent of those surveyed identified that they had an unmet advice need, and 3.2 million were open to using an adviser in the next two years. 53% of investors on the ASX say they want a level of assistance but don’t want to use the service offerings available largely today.

Clearly, there is a market of Australians who would like to receive some form of investment advice or help. For a wealth manager’s service to be sustainably attractive and useful for this new market standard, it must be delivered on personalised best interests basis, and probably on a ‘fee for service’ basis in order to be attractive. This means the generation of “rent takers” that have derived fees from products will soon face business threats, while those who can re-orient around their clients and provide something better than one size fits all and centre their services around customers will build a strong engagement model.

To serve this growing middle ground between a one size-fits all, and completely bespoke investment proposition, intermediaries need to use technology enabled techniques to mass manufacture customer specific portfolio based investment experiences. These techniques enable advisers to extend their engagement with prospective and existing clients to address the specifics of their situation and preferences with ease.

By doing so, advisers can extend the conversation beyond high level risk profiling to specifics from the investor along the lines of “I want 40% of my portfolio in FAANGs” or “I’m concerned about capital gains tax if you sell my CommBank stocks”, or “don’t make adjustments for less than $10K on my $1M portfolio.” The more you can create a combination of a suitable investment strategy, plus the clients’ input, the more value shifts away from managing the money to the stickier aspects managing the perspective, and what is important to them,  of each individual client.

Clients notice, and value, the difference when their wealth manager manages their money in the context of their personal goals and situation.

A long term sustainable intermediary economic model

For a long-term sustainable intermediary based business model long term customer value (in the form of revenues) must exceed cost of customer acquisition by some multiples.

With commission-based business revenue models out of the question, the relative value of one size fits all solutions is becoming marginal as investors in many cases can invest like this themselves, and transactional brokerage revenues are very ‘choppy’. Quality revenue comes largely from fees associated with how the customer sees ongoing value. Increasingly, this judgement of value is relative to the costs of investors investing themselves.

Retail investors have broad access to the markets, meaning value is not so much about buying and selling investments or products, as it is about having a process that can: save time, put knowledge in context of the investor’s situation to determine what to buy and sell, and follow a disciplined process with courage. The ongoing blend of professional expertise merged with customer perspective has to move beyond product selection into a more client integrated offering, that is, tailored investment portfolios.

A long term sustainable operational and regulatory model

Not only is it important to ensure the customer sees sufficient value in continuing to pay for the service components as opposed to doing it themselves, it is also important to make sure that the way the income is sourced survives the test of operational robustness and fitting within current and future regulations.

With conflicted and product commission remunerations banned in many cases, the servicing of clients with a portfolio is a valid and demonstrable way to add value to clients, more so when this is personalised to the clients (and their best interests).

An operational model to support the delivery of personalised portfolios at scale then becomes the challenge. However, when implemented with supporting technologies it is the key driver of scalable service delivery in a non-conflicted manner.

While outsourcing to a third party is an option, doing this raises a fundamental question: what is the value proposition of the intermediary who is charging the client? Customers value involvement and interaction leading to tangible actions and outputs. Outsourced tailored portfolio solution providers will very much need to sharpen their engagement model and pricing structures to be competitive against firms that deliver tailored portfolio services themselves with more broadly available technologies.

Bringing portfolio management propositions into an intermediary wealth management business is not so much about creating products for sale, which can bring conflicts, as it is about creating an ongoing, customer-customised value.

Once the decision has been made to implement a portfolio-based proposition, the next step now is how to make it scale to support business growth. Many firms promoting external one size fits all investment models are seeing their margins fall, given customers think “I can just do it myself if I can get access to those products and capabilities.”

A personalised approach has been shown to increase margins when premium fee structures represent premium service, however traditionally this has come at the expense of operational efficiency. The wealth managers at the forefront of change have found a way to service a gap in the market for a long-term, sustainable customer value proposition, and their fees, by offering personalised portfolio management in a way that enables industrial scale.

Mass tailored portfolio management mostly delivers more long-term value than either a once-off transactional model or product referral model. When operated with the purpose built infrastructure it is the basis for a highly scalable, sustainable business model. With margin decline across the industry associated with products and infrastructure, mass tailored portfolio management is the real opportunity to generate additional value. I would take it one step further and argue it’s the only sustainable long-term model in terms of customer value versus costs to deliver.

This mass tailored portfolio service proposition is about helping customers invest because they don’t have time, discipline, knowledge, courage, or trust in their abilities. It is also about helping them on a personalised basis because it makes it more about ‘them’ as opposed to buying an off-the-shelf that they could do themselves. And finally, it’s about doing it in a way that delivers an ongoing relationship and results in a viable long-term customer value to customer cost of acquisition model free from a regulatory or economic viability issues.


Like the disruption demonstrated by Netflix, Spotify and Uber, the next generation of financial services will have customers at the heart of everything it offers. To meet the advice needs of today’s investors, intermediaries need to take a step back and rethink not only what’s possible but essential for long term sustainability. In our rapidly evolving digital landscape, what’s the future of your business model if you don’t adapt to the demand for personalisation? How will your value proposition stack up against the ‘shiny’ and evolving on-line offers?

I believe scaled personalisation through mass tailored portfolio management is the only sustainable solution for providing sufficient value to sufficient customer numbers, particularly the mass affluent, high tax payers,  to sustain an ongoing business.

At Financial Simplicity, we have built technology to help close that gap that we feel is the key item to power the ‘Tesla of wealth management’, that is using new techniques and technology to help wealth managers and advisers run a future proofed sustainable, customer focused business.

This is the new bar and an essential direction for the wealth management industry. However, unlike Tesla with huge capital costs and lead times, everyone equipped with the right proposition and technology available on-line can deliver this to their clients today.

How can your business provide personalised advice at scale?

Book a call with us to speak on the benefits and costs of moving to a contemporary portfolio management solution.

Originally published in March SAFAA Monthly as “Personalised advice at scale: introducing mass tailored portfolio management

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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