Investment 101: The Shift To Implemented Consulting

Major shifts in the investment industry over the past decade have led to financial advisers having to adopt new advice models to best serve their clients’ changing needs. Selwyn Pillay, head of multi-management at Sanlam Investments, looks at how the multi-manager is adding value for financial advisers with an ‘implemented consulting’ advice model.

The role of financial advisers has changed markedly in terms of client needs and industry developments over the past few years. The challenges faced by financial advisers in this evolving investment climate include:

• A changed regulatory framework, with the Retail Distribution Review (RDR) on the horizon and the principles of Treating Customers Fairly (TCF) already adopted by most in the financial services industry.
• From an investment perspective, investors want to avoid capital losses in the wake of the 2008 global financial crisis – they desire high returns when risk is rewarded but the avoidance of losses when risk is being penalised.
• The growth of multi-asset investing over the last few years.

Liability-driven solutions, solution-driven investments and outcomes-based solutions are all terms we hear regularly in the market these days. In the institutional space, target-dated funds or life-staged funds are the trend of the moment. These concepts all point to one thing – financial advisers need to manage an advice-driven process of classifying and assisting clients according to their particular risk appetite. The application of this process differs from adviser to adviser. Some favour passive asset management, while others like the active management route. And some advisers are moving away from a specialist approach to a multi-asset approach.

In this environment, how can the multi-manager assist financial advisers with the decision-making process, to offer the best possible advice to their clients? We have for the past three years used an ‘implemented consulting’ advice model in which we offer our bespoke solutions which allow financial advisers to present the most appropriate combination of funds and fund managers to their clients. We are essentially an investment partner to financial advisers. The aim is not to sell our products, but to assist them in creating solutions.

How does this consultancy approach work in practice? Firstly, we pass the best of our market research insights on to financial advisers. Our research and our research methodologies are unrivalled in the industry. We inform advisers about investment ideas, macro-economic trends and industry developments, trends and opportunities. Secondly, we offer fund manager research – we recommend certain managers of our own funds, and also advise on other managers which may offer advantages in terms of potential opportunities to avoid identified risks.

Ultimately, particular solutions are developed for clients in conjunction with financial advisers in a portfolio construction framework. We monitor these solutions on a daily basis for regulatory and other compliance, as well as investment performance. Strategic reviews are then held with each financial adviser on a quarterly basis.

As a specialist discipline of investment management, the multi-manager can play an indispensable role in assisting financial advisers to offer the most appropriate advice to clients in what are challenging times for any investor. We have the advantage of access to leading research and information, and we want financial advisers to take this opportunity to be exposed to some of the best insights and solutions in the fund management industry.