RSMR has been offering model portfolios since 2012 through a number of partnerships and some of you will know RSMR through using these advisory models. We caught up with RSMR’s Ken Rayner to hear about the problems that some of their advisory model clients have been facing.
The dreaded quarterly review
“We do receive feedback about the drawbacks of advisory models. One of the comments I get from advisers and paraplanners is that they don’t look forward to the RSMR quarterly review, because that’s when we’ll recommend any portfolio changes – and any changes then have to be agreed by end clients. To apply those changes properly across all end clients is a lot of work.”
Treating customers unfairly
“An advisory model service can’t generally be applied to all end clients at the same time. This means that some will have a more up to date portfolio than others, simply because they’ve agreed to the changes more quickly. Plus, there’s the fact that most advisers will see a client once, perhaps twice a year. So, if a portfolio is being reviewed quarterly, what happens to recommended changes that don’t coincide with an end client review meeting?”
The risk of portfolio drift
“It’s almost impossible for each individual client to have a portfolio that’s exactly aligned with the central set of portfolios that we’re providing through an advisory model. This makes it very difficult to properly monitor where end clients are sitting on the risk scale.”
What’s to be done?
“With our advisory models we try not to make too many portfolio changes on a quarter to quarter basis, which prevents advisers falling too far behind with getting changes agreed by end clients. We are also mindful of the differences in fund availability across different platforms; we consider carefully which funds to include so that this doesn’t cause a problem.”
The RSMR Managed Portfolio Service: 12 portfolios available on Dynamic Planner
“Many advice firms could be better served by choosing the RSMR Managed Portfolio Service instead, which we operate on a discretionary basis. We formally review the whole range of portfolios monthly and the portfolio management team have complete control of making all necessary changes. This doesn’t require the end client’s approval and the same changes are made across all platforms.
“That said, we don’t tend to make lots of portfolio changes. We focus on the medium to long-term, but running portfolios on a discretionary basis allows us to be more nimble when we need to be. Our structured, team-based approach to qualitative fund research and portfolio management has generated consistently good returns. This ensures that Dynamic Planner users have a range of attractive options to align with investor risk tolerances and investment preferences with each of the 12 portfolios being formally risk profiled by Dynamic Planner on a quarterly basis.”
The three RSMR Responsible managed portfolios are part of a suite of 12 in the RSMR Managed Portfolio Service. The Cautious and Dynamic portfolios launched three years ago and join the more established Balanced portfolio. In Dynamic Planner, the Cautious, Balanced and Dynamic funds are currently a risk profile 4, 5 and 7, respectively.