Scrutinise fees
Finally, in a low-return world, fee containment will be of growing importance. Advisers and wealth managers will need to be increasingly sensitive to this with clients. It will become ever more important for wealth managers to distinguish carefully between alpha and beta and to ensure that they reserve higher management fees for only those strategies that genuinely have the potential to deliver higher alpha.
Cara Williams is senior partner and global head of Mercer Investments’ Wealth Management business and Global Technology Solutions
EXPERT VIEW
Fraser Donaldson, Insight Analyst (Investments) at Defaqto, highlights a key challenge for advisers when looking at discretionary services:
“A new paradigm. When I hear this phrase I treat it with scepticism. More often than not, I have been right to do so as things invariably revert back to well-established fundamental principles. However, I think in this instance, we are really beginning to witness a new way of thinking for many advisers.
“There is a huge challenge in changing the mindset of advisers to focus on what the client needs. Deliver this in as risk-averse way as possible and they will thank you.
“Ask yourself a question. Do you look at performance and instantly dismiss below-average performance over relatively short periods of time in favour of something that is top quartile, even consistently, over say five years. Should you? Ask yourself what the manager is trying to achieve and then see if that is aligned with the client?”
