Applied Financial Planning
Redesigning a practice
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About Forte

Before we begin, it is important to note that managed portfolios may not suit all clients, so an adviser's first consideration will always be "is this in my client's best interest?". In this case study the adviser completed a full review of individual client circumstances to determine the suitability of a managed portfolio solution, before making any recommendations. With that in mind, let's explore managed portfolios.

As an industry, we have all witnessed the exponential growth of managed portfolios, in 2004 funds under management (FUM) in Australia was circa $5 billion, and by 2016 FUM had risen to $31 billion. This growth rate has accelerated over the last two years, where we have seen growth of 45% to $45 billion in 2018. The high price/earnings ratios of 100 times or more than the listed providers are trading at, is reflective of the market's confidence that this growth is only going to continue at this exponential rate.

This confidence is well founded as we see migration of advisers away from the banks' oligopoly and for the first-time allowing practices access from second generation wrap platforms to third generation managed portfolios. Additionally, the case for a managed portfolio has been strengthened by pressure from Australian consumers who are seeking low cost and transparent investment solutions.

The anecdotal and surveyed adviser resistance to adopting managed portfolios often includes:

  • I don't know enough about them
  • They are too expensive
  • If it's not broken, why fix it?
  • The market has so many choices, how do I select the best one for my clients?
  • It will take too long and cost too much to transition
  • I have an end-to-end solution now, if I change the platform then it may not interface with my current tech providers and decrease, rather than increase efficiencies
  • Will I need to become a fund manager?
  • My clients are aged and are not comfortable with new technologies
  • It is a large project and I do not have the resources to manage the change at the same time as providing the ongoing service required.
This paper seeks to challenge these mindsets and demonstrate the reality of a move to a managed portfolio environment via a real case study. Managed portfolios are a great way to lift client engagement, attraction and enhance business efficiencies. The case study follows a business over a three-year timeline and the challenges they faced and the outcomes achieved. The report will look at the impact on all stakeholders including clients, staff and the business owner as well as the effect on business profitability and enterprise value.

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