The change from a world of low interest rates, low inflation, and muted geopolitical risks to a world of higher interest rates, a cost-of-living crisis, and simmering international tensions has helped turn conventional investment approaches on their head.
Meanwhile, today’s regulatory focus, which requires advisers to be more proactive in their pursuit of good customer outcomes, has made life increasingly difficult for those advisers still offering their own in-house portfolios.
This shifting backdrop means many advisers now need to evaluate their existing investment processes. They need to recognise where the risk lies in their businesses, how to manage escalating costs, and improve their profitability, while still delivering positive outcomes for their clients.
Creating an efficient investment process
If you are still managing in-house portfolios for your clients, your first step is establishing an appropriate long-term strategic asset allocation. This requires in-depth analysis, research, and specialist investment tools. The strategic asset allocation is the bedrock for investment returns in any portfolio, so finding that optimal mix of asset classes and investment styles is key to success.
Once an appropriate investment mix has been decided, it then comes down to screening and choosing the appropriate funds with which to populate each of the portfolios.
Manager selection
To withstand regulatory scrutiny, any investment process will need robust, repeatable practices in place to identify which funds, and which managers, are best placed help the portfolios achieve their objectives. This is where due diligence will need to be evidenced as it is the only way to ensure the right building blocks are selected.
