Technology
16 Sep 24 10 min read
Utilising multiple platforms and delivering a consistent service to clients is challenging from both an adviser and Model Portfolio Service (MPS) provider perspective. This article explores how we provide a consistent and quality service as part of the M&G Wealth Investments MPS solutions and hence how using our MPS solutions can help remove some of this burden from advice businesses.
Operations are essential to delivering a great MPS offering; how you’re going to manage and update models needs to be considered when setting up portfolios. To give it the focus needed, we have a dedicated operations team with defined processes and controls, backed by strong governance and oversight within the wider M&G group. This is an integral part of the service you receive for our competitive 0.15% flat fee, irrespective of which models you access. Having this dedicated team allows us to have a flexible approach to rebalancing where we typically rebalance every three months. Removing complexity from your CIP and CRP means you can focus more time on customer service and create better outcomes for clients.
Updating models on platforms takes a significant amount of time. There are a handful of platforms that enable changes to be uploaded in bulk, but most require each change to be manually keyed. Let’s imagine that you had 30 models to update across 12 platforms and each model had 6 holdings where the amount held had changed. That would mean 1,800 data points need to be updated across the 12 platforms, all of which have different user interfaces!
With that many data points, ‘4-eye’ checks aren’t enough. Operational issues with rebalancing are often a result of relying on manual processes, due to a lack of investment in technology. At M&G Wealth Investments, we use proprietary technology and have robust controls around updating models on platforms. Our systems are a central hub that we use to reconcile fund holdings on platforms and produce reports that enable our staff to make changes to models more efficiently. This helps reduce the time to rebalance all our models across 12 platforms and minimise errors.
By operating a core system, it has also enabled us to automate other processes – for example, reporting our holdings to third party risk rating firms. It gives us capabilities to integrate with other third party providers, such as Criterion, who have built an API integration between platforms and DFMs.
We offer an unfettered MPS solution, meaning that we use funds from a number of different providers. The breadth of funds available on platforms is an important due diligence consideration when deciding which platforms to work with, as we don’t want to deliver poor outcomes to customers. Our mantra is to use the same funds across all platforms that we work with, so all clients receive the same portfolios irrespective of your chosen platform. This is possible by permitting small variances such as income vs. accumulation share classes or minor fee differences. Fewer model variations means that we can maintain consistency for advisers and clients.
From our experience, there have been very few instances where we have not been able to access our “optimal” fund choices and preferred share classes. When a fund is not available, platforms typically can load a new fund within a week or two, and due to the size of our assets there are less barriers to obtaining access to the new funds. More recently, platforms now have the functionality to ‘ring fence’ preferential institutional share classes which enables us to access cheaper share classes which are not available to wider platform users and reduce client portfolio costs.
M&G Wealth Investments has a flexible approach to model rebalancing rather than rebalancing at a fixed point each month. Sometimes, markets don’t move a significant amount for a few months. Or, from an investment point of view, we’re happy to hold certain investments at slightly higher weights because our views continue to be positive. By only rebalancing when there’s a specific investment-driven rationale, we can lower potential transactional charges imposed by some platforms and reduce the number of potential capital gains tax chargeable transactions. Also, we have the fluidity to implement an ad-hoc rebalance when the market dictates or when there is an opportunity to buy or sell.
We submit rebalance instructions at the same time across all platforms to ensure the consistent treatment of clients during a rebalance. Typically, we rebalance around the middle of the month, avoiding clashing with automated month end withdrawals and deposits. This reduces the risk of client portfolios being missed from a rebalance.
Platforms are responsible for custody and trading of client portfolios, however careful planning and execution of rebalancing by DFMs can minimize the differences in portfolio performance across platforms.
The landscape of model management on platforms is evolving. Technology providers have started to build solutions to meet the specific needs of DFMs and reduce some of the operational challenges of managing models on platforms. Adoption of these solutions will take time. At M&G Wealth Investments, we believe technology solutions are the way forward and we are in a strong position to leverage these efficiencies and deliver consistent and better outcomes for clients.
Past performance is not a reliable indicator of future performance. The value of an investment can go down as well as up and your client may get back less than they’ve paid in.