A model portfolio service (MPS) launched by Invesco and powered by Intelliflo has been described as a potential “loss leader” for the fund house and a money maker for advisers wanting to appear to manage a multi-manager portfolio rather than just recommending a fund.
The MPS, which will be built and actively managed by a 40-strong team at Invesco, will initially launch with a range of multi-manager model portfolios which Invesco said aim to meet a variety of adviser and client needs.
Invesco will be the first firm to offer MPS via Intelliflo’s technology which it said will help streamline the advice process through automated client communication for portfolio changes and by allowing advisers to maintain risk-rated portfolios more easily and efficiently.
Advice firms will pay £1 per client per month, plus VAT, to access the model portfolios and this fee will be capped at £70 per month per advice firm.
However, Fundscape editorial director Gavin Fielding said: “Invesco won’t be making any money out of this at £1 per client and cap of £70 per adviser firm, so let’s start with the idea that this is a loss leader. If advisers buy into this then Invesco will be getting closer to the end customer and therefore distribution.
“From what I can see this is an advisory service and not DFM, ie the client has to confirm proposed changes to the portfolio, but because it can do so more quickly is delivering benefits similar to a discretionary service but at much lower cost.
“It doesn’t say how it will do this but given Intelliflo have benefited from big investment in technology and open banking has also been mentioned, it would make sense if this was mobile device-based client confirmation that goes automatically back to the adviser and platform. It becomes ‘near DFM’ like in terms of reactivity.”
Advisers can justify high fees
Others in the industry are split on whether the launch will be an adviser favourite for its simplified process, or an easy justification for high fees.
Gbi2 managing director, Graham Bentley said there will probably be more providers than Invesco offering the service through Intelliflo as it replaces the time and associated cost of admin with a maximum £70 fee per advisory practice.
But, he added: “As I understand it, the ‘sale’ is a more efficient means of administering advisory versus discretionary portfolios.”
“Perhaps the more important question, from Invesco’s perspective is why yet more model portfolios, as opposed to multi-manager Oeics, are more tax-efficient?,” he added.
“Invesco already has the Summit range of volatility-managed, fettered funds of funds. The answer of course is that adviser charging is more easily justified by appearing to manage a multi-manager portfolio, than merely recommending a fund.”
Deal was on the cards
Altus Consulting principal consultant Ben Hammond said the launch of an MPS service from Intelliflo was always on its radar, and with the Invesco purchase a year ago, this development is likely to have been accelerated.
He explained that Intelliflo has developed a number of plug-in technology modules for its users, via its Intelligent Office (iO) store and provided a competitive advantage of competitors.
“Centralised investment propositions continue to be favourable with advisers and the launch of this collaborative, low-cost option will give both Intelliflo and Invesco added traction in the market,” he said.
Portfolio Adviser reached out to Invesco for comment but did not receive a response.
Impartiality
Fielding argued that impartiality could also be a factor of the launch. He said Invesco is likely to want its own brand funds to be selected but it will have to pick the best blend using other managers, which may not be Invesco funds. “It’s similar to the problem faced by Standard Life on its in-house DFM,” he said.
“Presentation of impartiality and how selections are made needs to be transparent. Invesco have a solid reputation, and this could be an alternative for customers that see Mifid II cost disclosures based on adviser and DFM and platform, and fund manager combinations as too much.”
Invesco plans to launch its MPS service later in the summer.
Chris Lyes, head of retail distribution at Invesco, said: “Advisers in the UK face increasing challenges to meet evolving market and regulatory challenges. We believe that by bringing Invesco’s investment depth and expertise onto the cutting-edge technology of Intelliflo we can deliver improved choice, investment outcomes and value to advisers and their clients.”
