The development of fund supermarkets has brought major benefits to UK advisers and their clients ove...
The development of fund supermarkets has brought major benefits to UK advisers and their clients over the past two years.
Supermarkets permit the easy construction of multi-manager portfolios, using different funds from a variety of the top fund management houses. The investment benefits of this type of portfolio diversification for clients are clear: far more tailored portfolios can be created, personalised to clients goals and attitudes to risk, featuring best of breed funds in combination.
All this choice is available from a single platform, meaning just one dealing process, either by application form or over the web, and the ability to check on the subsequent progress of investments whenever the adviser or client wishes. By exploiting new technology, most fund supermarkets can offer all this, online and in real time, without any extra charges.
Supermarkets offer exceptional choice of investment funds and a single view of accounts. Advisers can benefit from simplified record keeping, consolidated administration services and a single counterparty for commissions.
It comes as no surprise, therefore, that supermarket use among adviser firms is rapidly becoming the norm. But to really extract maximum benefit from supermarkets, advisers should consider centralising all, or at least the substantive part, of their clients' investments onto a single supermarket platform. Re-registration and transfers both offer a straightforward and effective means to achieve this aim. The former is a way of effecting a change in record keeping without forcing clients to sell then buy back holdings once monies have been moved. As such, it works well when clients wish to retain existing investment exposure but benefit from the intrinsic advantages of centralising their accounts in one place.
While re-registration is steadily gaining acceptance in the industry, it is likely to become mainstream sooner than some might expect. In the interim, transfers, where assets are sold and cash moved, remain a viable option, particularly when changes to fund selection within a client's portfolio are also being made. The key advantage of both routes is that, once investments are centralised, advisers can review a client's entire portfolio in an instant, making the task of ongoing portfolio oversight and advice on future funds to buy, sell or switch much easier.
Crucially, advisers can deliver improved and more timely reporting directly to their clients, combining information about their portfolio with the adviser's own investment outlook. This can be done online in real time, in contrast to today's position, where an adviser often has to request valuations from each provider in a client's portfolio, combine these into a report, then deliver it to the client. Advice practices will benefit in other ways from embracing supermarkets fully. Online management information is offered by all the leading services and the act of centralising portfolios can enable advisers to develop deeper relationships with new and existing clients.
Doing so can protect advisers from the risk of losing clients to centralisation offers from other parties, as competition for wealthy clients becomes ever more intense.
Rob Fisher is head of IFA marketing at Fidelity Investments
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