How to achieve customisation that also meets your fee budget

When we buy big ticket items like a house, few things about the process are automated. We hire an agent that can help fulfill our requests, we spend hours researching online if the neighbourhood is good and we inspect numerous homes to ensure it ticks all the boxes on our need and want list. Don’t your clients deserve the same personalised approach?

In an effort to offer their clients a consistent investment approach while at the same time gaining leverage in how they manage their business (and hence potentially making their business more valuable), many licensees and financial advisers have embraced the services of an Outsourced CIO. In many cases this can deliver a tailored and cost-efficient approach. Understanding that every advice business is unique so that’s why when reviewing outsourced CIO’s, it is important that they have the flexibility and tools to precisely align to those needs.

Getting the right customisation/outsourced solution that also meets your fee budget can be tricky, so finding the right provider that can deliver both needs some careful consideration.

Here are three steps to consider

  1. Design

    It starts with understanding your clients. What demographic of clients do you have, where are they in their investment journey? What risk profiles are you working to? You then need to determine an appropriate mix of underlying asset classes from the assets that will be selected.

    A great outsourced CIO will consult closely with you to understand your goals and any nuances associated with your business. With this in mind, they will provide guidance on how to be build a customised solution that best fits with your practice and client goals.

    Manager Research and strategic asset allocation is another key component of the design step. It takes time and can often put a strain on your resources. An outsourced CIO with access to Global investment managers can help reduce your overall costs, using their scale to negotiate more competitive rates with sub-managers and pooling your assets with other clients. Outsourced CIOs will optimise your portfolio to meet your fee budget.

  2. Implementation

    Building a customised solution with the right design and managers is just the start. A knowledgeable implementation team can make all the difference in the successful implementation and ongoing management of your portfolios.

    Your outsourced CIO should provide you with a dedicated management team. They will coordinate key roles and responsibilities of investment management, governance and the underlying fund managers. When the markets change as they do daily, your outsourced CIO should be dynamically monitoring and managing your investments day and night.

    The right partner adds additional depth to your team, providing the support you need within a level of discretion that suits you.

  3. Ongoing management

    The final step is to monitor and resolve investment or operational issues. Your solutions partner should provide quarterly performance and operations reviews, incorporate new investment concepts as developed and implement manager changes. Customisation doesn’t stop at the start, as your business evolves so should your solutions.

Customisation and fee budget case study

A financial advice organisation managing over $600m in assets. The group had a goal to enhance their investment offering for their clients whilst working within a set fee budget. Risk-Control was of significant importance, with many longstanding clients planning for their retirement, the financial services group wanted to give their clients the best chance of achieving their financial goals.

The advice organisation partnered with a leading outsourced CIO provider to help better meet its investment objectives through a customised solution to work within five risk profiles.

The partnership consisted of the following phases:

  1. Setting strategic direction. Five risk profiles, the advice organisation had a mix of clients in accumulation, pre-retirement and retirement, therefore having a blend of model portfolios was key to achieve investment objectives across different life stages and risk tolerances.

  2. Implementing a customised solution of five dynamically managed portfolios. The portfolios were to be accessed through platforms selected by the organisation under their own private label.

  3. Maintaining ongoing risk management and performance reporting. The outsourced CIO manages the portfolios within the risk tolerances and guidelines outlined by the financial advice organisation and their licensee. In addition to this the outsourced CIO provides monthly and quarterly reporting to the organisation, their licensee, and the platform.

This three-phase approach helped the organisation address their need for a private label range of managed accounts with a fee objective of a maximum of 80 basis points per account, whilst also managing risk and achieving outcomes for their business and clients.

The bottom line

These efficiencies outlined typically allow advisers to manage expenses by spending less time operating their business and instead spending more time with clients and developing new client relationships.

Outsourcing can help financial organisations and their advisers gain efficiencies in investment research, trading costs and servicing requirements. This is the beauty of outsourced CIO.