Financial services industry structurally flawed, says SELECT

SELECT Asset Management has launched its Customised Portfolio Solutions with a view to putting investors’ interests first and addressing what it considers to be structural flaws in the financial services industry.

“We believe there are a number of structural flaws within this industry that actually create very poor portfolio outcomes for investors,” SELECT chief executive Andrew Fairweather said, adding that the launch of SELECT’s Customised Portfolio Solutions is an attempt to get the language of the investors back into the vocabulary of the financial services industry.

Fairweather said it differed from traditional model portfolios with a narrow universe of investment opportunities in that it automatically updates portfolios across all clients simultaneously as appropriate and in real time, using the full range of available investment opportunities.

“I think for too long we’ve been too focused on what’s happening with dealer groups, what’s happening with advisers and what’s happening with products — people have stopped talking about what’s happening with the investor and no one seems to be championing their rights,” Fairweather said.

“It’s very relevant at the moment when you look at what’s happening with Astarra,” he added. “Every single year there seems to be another scheme that robs people of the ability to retire on an income that they deserve.”

Fairweather said the global financial crisis revealed that many adviser business models are structurally flawed because 90 per cent of the adviser force is owned by an institution and are therefore generally selling in-house portfolios. He added that these portfolios are themselves in the main structurally flawed because their starting position is more about managing the business risk of those organisations than looking after the investors’ best interests.

For those investors who do not want to go through one of those institutionally-owned firms, their only recourse is independently-owned advisers, who often do not have the resources required.

“Because of this lack of resources, you generally see that these individually-owned financial planning firms try to pick individual stocks and individual managed funds — we just don’t think that single-operated, independently-owned dealer groups can actually deliver a robust portfolio in that type of setting.”

Fairweather said as a result, there is an enormous amount of dissatisfaction towards financial planners because they put themselves out as experts and therefore any poor performance experienced was directed at them. He said the worst possible outcome was that investors would take matters into their own hands.