Fiducian: Outsource manager selection, improve service for clients

Financial advisers can better serve their clients if they don't get bogged down in the day-to-day business of stock and manager selection, one manager says.

Friday, July 6th 2018, 6:00AM 2 Comments

by Susan Edmunds

Indy Singh, of Australia-based Fiducian, is speaking at the Meet the Managers event next month, discussing portfolio construction.

He said most financial advisers were too busy with dealing with their clients and servicing those relationships to spare time to research fund managers, stocks and securities or work out where to add value to client portfolios.

He said there was a time when there were only 20 or 25 funds in Australia but there were now 2000-odd.

Fiducian offers a manager-of-managers funds, as well as its specific India and technology offerings.

Singh said they could be used to take over the portfolio construction process, which he said was a more efficient option for financial advisers wanting to build diversified client investments, and save them trying to pick the best fund managers for their clients in a constantly changing market.

The investment team could make decisions about asset allocation and adjust for changing market conditions in a way that would take an adviser significant amounts of time if they were to try to do it alone.

The Fiducian team uses its Manage the Manager System to apply analysis to identify well-performing funds across a range of asset sectors. The allocation could be tilted in response to conditions and client circumstances.

"Advisers can focus on what they are good and - we do it more efficiently and at lower cost."

Most would not understand the day-to-day operations of a fund, anyway, he said, and what stocks were being bought and sold. "They only find out after the horse has bolted."

Outsourcing to a model such as Fiducian's would leave advisers to focus on what they were good at, he said, with fewer administrative and compliance requirements. "We do it more efficiently and at lower cost."

Most advisers were not skilled in stock selection, he said.

Adviser Brent Sheather said it was incorrect to suggest that financial advisers should step away from stock selection and asset allocation considerations.

"Asset allocation needs to reflect the risk profile, income requirements etc of an individual and a fund manager, unless he meets the client, is going to be completely oblivious as regards those facts.

"Determining asset allocation is one of the most important roles we undertake for clients. I can’t think why a fund manager would say such a thing but I suspect it is because he or she believes that his firm can maximise returns by switching between asset classes. Another less charitable description of this activity is “market timing” and all the academic studies show that this doesn’t work."

Tags: asset allocation Fiducian

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Comments from our readers

On 6 July 2018 at 9:36 am Barry Read said:

Brent misses the point again. Advisers are not always fund managers. The important bit about advice is planning and strategy to achieve goals and objectives. Part of this may involve investment and the adviser can identify the investment requirements and risk tolerance etc and the final part of that process is fund or asset selection. There is not one right way to do this to achieve the results for the the plans goals or strategies. Therefore outsourcing that one part of the process is a sensible choice for some advisers.

On 6 July 2018 at 10:55 am mike6156@gmail.com said:

Brent has not missed the point. A number of Advisers control the fund and asset selection part of the process and produce satisfactory client outcomes. A number outsource this part of the process and equally produce satisfactory client outcomes with the corresponding higher fee structure. Barry's comment about "there is not one right way to do this" is a debate best left as a separate discussion. I would also disagree fund managers can do it at lower cost.

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