The future of advice is institutional grade

However, if an advisory firm’s mandate, like ours, dictates guiding those nearing or in retirement to deliver sustainable, consistent, and strong income and growth, then doing so is becoming increasingly difficult.

In the current uncertain economic environment, an investment approach requires more structure and discipline than ever before.

There are many approaches to successfully achieving this.

First, have a structure and build every client an extensive Investment Policy statement or strategy. This is separate from the financial planning discussion as this is a very different consideration.

The second is to use this as a guide and report regularly against it. This involves arranging formal quarterly reviews with every single client.

The third, which is also part of the first step, is to truly understand what clients are seeking and whether they can achieve it. One way we have achieved this is by building a partnership with Atchison Consultants to bring a prudential approach to portfolio construction and asset allocation. One of the most powerful tools in portfolio construction is the ability to be able to test and back-test changes to asset allocations to understand their impact on return expectations.

The fourth step is to have discipline to the rules on which the portfolio is managed. Nowhere is this more evident than during the events of 2020, when those who stuck to a consistent quarterly rebalancing strategy were able to increase equities allocations at or near the bottom of the market.

Finally, it comes down to the quality of the investments we recommend and manage. We are product-agnostic, meaning we are open to using both active and passive strategies, exchange-traded funds, managed funds and direct shares where appropriate.

The key, however, is applying rigour to the analysis and due diligence process of accessing potential investments.

Do they have strong governance and risk management processes? What does the quality of the underlying assets look like? What level of transparency do they provide?

The availability of institutional-grade assets to advisers has continued to improve, with sectors including private equity, commercial property and factor investing strategies continuing to gain traction.

All this can be used to build a robust portfolio for clients – in an environment where agility can pay rich rewards.

Drew Meredith, director, Wattle Partners.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.