Client portfolio management in a time of crisis
This week’s Monday Reflection encouraged business managers to use the current mandated “hibernation” period to update and continue their strategic planning and rollout. As many readers would be aware, Philo is a provider of managed discretionary account (MDA) services, and the article prompted some questions on how MDAs are being used to respond to current market conditions and what it means for planning firms. We felt the answers were interesting enough to share.
Current use and impact of managed accounts: Philo has developed a range of MDA services with different advice firms and asset consultants, so the nature and timing of investment decisions are as individual as they are. Some common themes: we have seen a number of model managers, already modestly underweight growth assets leading into the crisis, rebalance to their pre-crisis target after the large falls in equity markets. In the last week or so we are seeing model managers increase liquidity in portfolios in anticipation of future buying opportunities, though without high conviction on the next direction. Where direct equity holdings are concerned, trade sizes have been larger in percentage of portfolio terms than normal, with more frequent trading. Clients’ portfolios are being traded more frequently than normal, and portfolio managers are not constrained by the administrative burden and cost of client portfolio changes the way advisers are. We are seeing a reasonable amount of two stage trading – selling one thing and then sitting in cash for days or weeks before the next trade – a luxury generally less used in SOA/ROA based approaches due to the administration burden. Advice firms are thankful where they have clients invested in managed account services, but frustrated where they are only part way through the transition and aware that non-transitioned clients cannot be managed as actively.
How quickly planners can access MDA services from Philo: For those willing to use an existing standard set of model portfolios offered by one of a number of asset consultants appointed by Philo, it is possible to be up and running in 4 to 6 weeks. For those wanting a tailored set of portfolios, potentially with an asset consultant Philo has not worked with before, the timetable could be 3 to 6 months or longer, depending on how long the planning firm takes to make key decisions. For some firms, a combined strategy may suit – moving quickly to a standard service with a view to tailoring it in time.
The overarching theme is that where a planning firm has clients in an MDA service, they have enormous flexibility to trade when they feel they need to, and client portfolios will be adjusted quickly and equitably, without the internal administrative burden that manual implementation of investment decisions entails. For these planning groups, the stresses associated with the current environment are that much less and their clients are receiving more active management of their portfolios.
If you would like to know more about how an MDA service could help your business, please drop me a line by return email or call one of the following: Brett Sanders 0438 071 094, brett.sanders@philocapital.com.au; Toby Potter 0414 443 236, toby.potter@philocapital.com.au; Mathew Birch 0411 114 355, mathew.birch@philocapital.com.au; James Freeman 0428 644 208, james.freeman@philocapital.com.au.
Regards, Brett Sanders