By Chris Jones, Proposition Director

Last year’s crisis vindicated a ‘stay invested’ message to clients and once again underlined the value of diversification through multi-asset investing. Having said that, we have all seen since the social and economic uncertainty which has continued to drive increased volatility in markets.

As we become increasingly accustomed to the new normal, multi-asset investors are all facing rebalancing responsibilities and many are facing tactical and active management decisions. How those decisions are made and how and when the instruments are bought or sold is quite different, depending on the type of solution. I am not talking active versus passive; I am talking about collectives versus discretionary portfolios versus advised portfolios in a post-MIFID II world.

It is entirely possible to build an identical portfolio in a collective (e.g. OEIC), a discretionary managed portfolio or an advised portfolio and therefore it is easy to find or build either to be compatible with your client’s risk profile.

It is what happens afterwards that is quite different. The obvious differences are:

  1. The way your portfolio is reported to the client
  2. The way charges are disclosed
  3. The breadth of assets available
  4. The way assets are taxed
  5. The speed in which the investment manager or adviser can act

At Dynamic Planner, we are agnostic and enable advice firms to select compatible solutions for their clients in any structure safely and efficiently. However, for advised portfolios it is important that you use Dynamic Planner’s Client Review and Recommendation functionality to help you comply with post-MIFID II regulation.

If in Dynamic Planner you select a risk targeted, risk profiled or Risk Managed Decumulation fund, you can rely on the asset manager to rebalance and make buy / hold / sell decisions in line with regulations. However, if you are rebalancing an advised portfolio, then that responsibility is the advice firm’s and Dynamic Planner now enables the required suitability assessment and report to be produced quickly and easily before any transaction to trade instruments is made.

We know from our research, which shows that approximately 70% of platforms provide auto-rebalancing ability, but what you cannot do is rely solely upon that without meeting the responsibilities which came into force at the start of 2018.

COBS 9A.3.2, COBS 9A.2.18 and in particular COBS 9A.2.23,54(1) states: “Where investment advice or portfolio management services are provided in whole or in part through an automated or semi-automated system, the responsibility to undertake the suitability assessment shall lie with the investment firm providing the service and shall not be reduced by the use of an electronic system in making the personal recommendation or decision to trade.”

These responsibilities and a more complex and uncertain economic outlook have seen an increased use by advisers of risk targeted, risk profiled and Risk Managed Decumulation funds in Dynamic Planner, alongside collectives and discretionary managed portfolio services. All of these are supported by our Client Review and Recommendation functionality.

Now, more than ever, it is about knowing your tools and choosing the right tool for the right job.

Find out more about Dynamic Planner’s new Recommendation reports.