We need a new approach to wealth management. With the FCA turning its attention to the sector, pressure is mounting on the traditional culture of high fees and indifferent service.
How many of us either enjoy, or are comfortable with, managing our own money? Well, that depends on what we mean. For many of us, certain investments are exciting decisions to make: buying a new property, a stake in a friend's firm, fine art, private equity – we are willing to spend real time and effort on all of these.
The truth is that a very small number of us are interested in financial market investments. We know we shouldn't put all our eggs in the property market, or in other illiquid and less transparent investments. However, at the same time, making our own decisions on global asset allocation, implementing that view via chosen securities, as well as ensuring the ongoing review of those positions, tends to be for the few not the many.
This is where discretionary wealth management comes in – having a team of professionals manage a portion of your money over a medium to long term horizon, and across a diversified asset base. They manage the asset allocation decisions and they provide the expert oversight that you may not want or be able to apply yourself.
So far so good; now the buts
But, what if that discretionary manager is charging such a high annual fee the returns they make for you are dramatically hampered?
But, what if the investments they make on your behalf are partly in illiquid and expensive investments, reducing your ability to exit if you need or want to?
But, what if you hand your money over and feel as though you no longer have real transparency or control over this portion of your wealth?
Too many buts… and all avoidable
With its final report into its investigation of the asset management industry published last week, there is pressure from the Financial Conduct Authority (FCA) for the asset management sector to do better in terms of net-of-fee returns and fairness to clients. The FCA is now also turning its attention to the wealth management and financial advice sectors specifically, again looking at fees and value-for-money.
We believe discretionary wealth management should be: diversified portfolios managed by professionals, yet kept transparent, flexible and low cost. All combined with an unbeatable digital experience and access to qualified advisers if needed.
Why accept the inadequacies or inefficiencies you may be used to from traditional wealth management providers? The simple answer is that you shouldn't and we think the FCA is unlikely to disagree with us.