[GRTV] Free model portfolios aim to improve the industry

GRTV speaks to Clayton Coplestone, principal of Heathcote Investment Partners, about a joint initiative with Kernel to get advisers thinking about portfolio construction.

Thursday, March 7th 2024, 6:00AM

by Andrea Malcolm

Heathcote Investments Partners and Kernel have gotten My Fiduciary to create model portfolios for financial advisers.

Heathcote principal Claytone Coplestone says, there have been significant winds of change in investment markets in recent years and the days of complacency and comfortableness in designing portfolios are now behind us.

“You need now to be very sure-footed about what you’re doing and why you’re doing it, particularly if you want a specific outcome, but also to justify the role that you play for your client,” he says.

The mandate to My Fiduciary was to use the ingredients of both firms to build the best five models possible. All Heathcote managers are active and all Kernel managers are passive which provides enough diversity to do so, says Coplestone.

“We gave them full licence and had no oversight. The models that resulted were pretty close to the normal My Fiduciary models albeit that these models are not designed to be something you take off the shelf and use without thought. They’re more to demonstrate how the various ingredients might go together to give a predictive outcome.”

Amongst the five is quite a diversity of stocks.

“We really want to encourage advisers to start thinking about portfolio design and construction. So, if you take something from this basket and something from that basket and put a blend together using some of the metrics that My Fiduciary has come up with, what kind of an outcome are you going to get?”

Coplestone says the aim is to challenge the industry to move away from complacency and to start thinking carefully about what could happen going forward. He encourages advisers to get more involved in their portfolio construction.

“I don’t think one size fits all. Unfortunately you can’t ‘McDonaldise’ the experience of the client. Every client has their own needs and expectations, and so ultimately when a client comes to an adviser they're looking for a bespoke solution.

“You may have the core of that solution ready made but equally there will be nuances around it that you need to tailor for each individual client.”

So,for example, in a bond fund instead of using what’s in My Fiduciary's portfolio they could use something else.

Coplestone encourages advisers, when they see the models, to try and make something best fit for the client rather than trying to wedge the client into something that’s already made.

He admits some firms that have offered model portfolios in the past have pulled out of the market.

“We’ve seen a number of groups come in and offer one size fits all solutions. That’s not this model. This model is ‘what does the end result look like if I start blending active and passive or different solutions together? So it’s creating thought and stimulating inquiry.”

He says at this stage the offering is a one-off. “Depending on demand I think we’ll review it periodically, quarterly is the obvious one.”

The portfolios are free. Kernel and Heathcote genuinely want to help the industry to improve, says Coplestone.