The survey found wealth managers were “far from transparent when it comes to revealing details of performance and charges” and that the average wealth manager was exactly that, average.
The question still remains: how do private clients know which wealth manager is best suited to their needs and how do wealth managers compare themselves with their peer groups?
One thing that has moved on dramatically since the summer last year is the number of people asking the question, with RDR driving IFAs towards at least contemplating outsourcing and having to answer the question: “Who shall I ask to run my clients’ investments for me?”
And here still lies the problem: how can those looking to outsource successfully compare discretionary managers’ capabilities?
Beauty parades are too biased towards the presentation skills of the companies and individuals involved who will never use a bad graph to illustrate a point.
Morningstar and FE have both said they are not looking to put together any kind of model portfolio comparison with the former warning that discretionary managers’ services are not easily comparable when it comes to comparing fees and performance.
Fraser Wealth Management is a Liverpool-based financial planner that hit the headlines this morning for apparently launching a performance comparison service although the firm’s managing director, Ian Mackie, confirmed to me he “does not have firm plans to launch anything”.
However, he has built up comparative data over the past two-and-a-half years from a number of discretionary firms to allow him to compare how he currently manages client investments (through CleverAdviser) with what else is on offer.
One difficulty, he says, is that two firms may both run a portfolio with the same risk rating but what does that actually mean?
In June this year, the Financial Times produced its own wealth management survey that, among other things, showed the average performance of balanced portfolios over five years ranged from -0.22% (James Brearley & Sons) to 56.1% (Ruffer).
The equivalent range for growth portfolios over the same period was -5.91% (Principal Investment Management) to 44% (McInroy & Wood).
But performance by naming convention and risk-rating – with the “past performance is no guide to future performance” caveat – is the way this industry works and there is little point in fighting it just yet.
There is no right way of comparing something as subjective as a discretionary wealth manager’s capabilities but starting with something quantifiable is a useful initial filter.
Some companies (Asset Risk Consultants, Enhance for instance) have built a business around analysing portfolio management data on behalf of the portfolio managers themselves – and long may this valuable service continue – though it would be good to see some of this research appearing in public so that those looking to outsource know who to ask the relevant questions of as well as being helped to ask the relevant questions in the first place.
