Nearly one in five advisers (18%) are putting client portfolios at risk by failing to carry out annual rebalances or reviews, research by Skandia suggests.
Without regular reviews, clients are in danger of owning portfolios which no longer meet their attitude to risk or their personal needs, warns Skandia.
In the survey of over 200 advisers, the majority (53%) did recognise the benefits of yearly rebalancing of portfolios where the asset allocation is returned to its original level, though 29% only rebalance for a small portion of their clients.
The figures point to further evidence of a transition to a new model of advice based around a process of regular, ongoing client focused investment reviews, says Skandia.
Of the advisers who do rebalance annually for most of their clients, 22% do so for all of their clients while 31% for the majority, the research suggests.
Annual rebalancing is a means of controlling volatility and keeping a portfolio in line with the client's attitude to risk.
According to additional research by Skandia, over a ten year sample case, an annually rebalanced investment portfolio would return 14% more than the same portfolio if it had not been rebalanced. In addition, the rebalanced portfolio would have been less volatile.
Graham Bentley, head of investment marketing at Skandia, says: "Rebalancing is considered one of the fundamentals of good portfolio management and should be a consideration in any investment process.
"Rebalancing forms one part of new model advice and our research shows that advisers are beginning to tune into the benefits it can deliver. With nearly half of advisers still not rebalancing on a regular basis, there is still a long way to go towards achieving the new model across the industry, but the direction we are moving towards is clear."
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