Demand for Risk Target Managed (RTM) solutions was driven originally by the then FSA’s ‘Assessing Suitability’ paper published in March 2011. This set a key expectation that when your clients are risk profiled, the investment recommendation is profiled on a consistent basis, both at the time of initial advice and as part of your ongoing service.
Today, MiFID II has put more onus on asset managers to demonstrate clear governance around their product development process, both to ensure close orientation of a fund to your customer’s investment objectives and demonstrate it is appropriate for the defined target segments.
The FCA’s ‘Asset Management Market Study’ (MS15 / 2.3), published in June 2017, marked another key evolutionary step, given the regulator’s concerns with how asset managers communicate their fund objectives to – and how useful they are for – retail investors. The FCA considers value for money products to be measured in some form of risk-adjusted net return definition. This can be broken down into performance achieved, the risk taken to achieve it and the price paid for the investment management services.
We are already witnessing significant growth in what are described as outcome-orientated investment solutions, which are typically multi-asset in nature. These include targeted absolute return and risk targeted funds, indicating a shift away from conventional fund design thinking.
Risk targeted funds can be uniquely hardwired into your firm’s centralised investment process, with the aim of delivering greater consistency of customer outcomes versus a relevant benchmark, alongside helping you demonstrate value for money in your client relationships. Combined with technology enabled delivery, such investment solutions can help tackle the economic challenge of delivering suitable advice profitably and at scale in a post-RDR world.
Dynamic Planner closely supports the recommendation of RTM solutions, which are explicitly designed to remain suitable against our risk profiles. Dynamic Planner further supports the selection and recommendation and review of risk targeted solutions by advice firms in other ways. We proactively talk to the FCA around the use of risk profiling and targeting and contribute to their consultations, hence the use of our allocations and analysis as its standard in its latest Investment Platforms Market Study Interim Report (MS 17/1 July 2018).
Dynamic Planner is the UK’s most popular risk profiling and asset allocation investment process. It helps advisers build investment propositions on whole of market research while providing access to more than 1,200 investments, including more than 120 RTM solutions. Dynamic Planner RTM funds under management grew by nearly 400% in five years, from £1.6bn in 2013 to £6.3bn in 2018. Dynamic Planner formally launched its RTM service in 2015.
Read more on the Dynamic Planner RTM service.