Client relationships
The one thing that both a bespoke and tailored offering share is that the engagement service that each provides is specific to the individual – a heavier touch service. They believe it is this service that clients value highly.
So is the new normal for a bespoke proposition a tailored portfolio inextricably combined with a bespoke client relationship experience? It seems so. The bespoke element no longer means having a unique portfolio constructed for you. It is more about the specific relationship between the investment managers and their clients, and the adviser.
A question that remains is, what about those clients who want an individually tailored portfolio with some of the features but not necessarily the heavy-touch engagement?
Of course, advisers thinking about tailoring may also consider managed portfolio services? Many view MPS as the halfway house between multi-asset fund investing and full bespoke discretionary service.
MPS can mean slightly different things to different people. Defaqto has adopted MPS as the preferred terminology for a portfolio of segregated holdings where all clients in a particular profile receive exactly the same portfolios (formula-based) and, crucially, are traded and adjusted, with discretion, by the discretionary managers.
Meanwhile, just as the larger discretionary managers have created unifying investment philosophies and provided their investment directors with a house investment process, we have seen a good number of private client managers, long established discretionary firms and private banks, create their own wealth businesses.
This is because they believe that they can, and must, continue to offer a traditional approach by providing individually crafted portfolios as well as an individual relationship to clients.
Some may question the resources available to a boutique firm, specifically the perceived lack of research capability that investment managers have to hand. However, it could be argued that with the large amount for research they can subscribe to, boutique firms can buy in knowledge and experience for marginal cost.
There are boutique firms out there that successfully serve a particular client segment or niche, and as a result are seeing their revenues grow.
Which clients?
There are some clients who are willing to pay for an exceptional level of service and engagement from the investment manager. They want that face-to-face contact to ensure proper stewardship of their money.
Other advisers need a bespoke service for clients with specific needs such as complex tax circumstances or a particular outcome that cannot be catered for by mass market solutions.
A few examples may be:
• As a result of a business sale and subsequent retirement, a client and family may need a wealth preservation strategy, together with waterfall payments, but leaving some capital for the next generation.
