Only one in ten advisers has the FSA authority to rebalance portfolios without having to first contact the client, research suggests.
Skandia says this is despite 90% of advisers evaluating the need to rebalance annually and 20% doing so several times a year.
It says the process of contacting clients every time an adviser feels a rebalance is necessary can be “heavily administrative and labour intensive”.
Graham Bentley, head of investment marketing at Skandia, says: “Most advisers face a real dilemma when it comes to portfolio rebalancing.
“The majority see it as a fundamental part of the ongoing advice process and review the need to rebalance at least annually.
“However, when they decide a portfolio needs rebalancing to a new asset allocation most advisers have to write to their clients to get their approval first.
“For each individual case this might not be such a burden but if advisers have to do it regularly for a significant part of their client base it can be time consuming and hence costly for the client.”
However, the switch to discretionary status, which is awarded by the FSA, can be a lengthy process and involve a large shift in business model.
Adviser James King, who runs the private client business of Price Bailey Chartered Accountants, made the switch to discretionary on 1 April.
He says it involved a large change in the firm’s capital adequacy requirements, but argues the move can prove a very worthwhile one.
He describes the process of contacting clients every time a rebalance is in order as “a pain in the proverbials” and says the rebalancing process when an adviser does not have discretionary status as “a dangerous game”.
020 7034 2636
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined