Asset managers who have designed products to attract high net worth investors should rethink using model portfolios as these have fallen out of favour among this segment, according to Tria Investment Partners.
Consultant, Edmond Cheuk, said if an asset manager’s model looked to target dealer group head offices for inclusion into their proprietary model portfolios, it would not achieve strong flows from these practices that focused on high net worth clients.
“In a world where the wealth industry value chain is evolving and traditional intermediaries often no longer enjoy direct access to advisers and end-consumers, is it time for you to review your approach to understanding your customers and prospects and how you target them?” Cheuk asked.
The Tria Retail Wealth Insights Programme on portfolio construction trends among non-salaried advisers found advisers who had a larger focus on high net worth clients (those with more than $1 million in investable assets), 15 per cent expected to reduce usage of model portfolios.
While the total market average of advisers expecting to use model portfolios over the next three years remained largely unchanged in usage at -1 per cent, usage among the mass market (those with less than $500,000 in investible assets) remained unchanged at zero per cent, while usage among the affluent (between $500,000 and $1 million) increased by three per cent.
“Key to establishing the right distribution strategy and model comes back to being able to conduct effective segmentation, for which the availability of good data on your target market is critical, Cheuk said.
In order to achieve long-term gains, it was vital for distribution teams to have a disciplined approach to customer relationship management (CRM) systems that captured and updated quality insights about their intermediaries and clients, including existing and future prospects, advocates and critics.
However, asset manager clients who distributed to retail investors were constrained by inadequate CRM systems, resulting in ineffectual segmentation that did not offer real insight on potential threats and opportunities, Cheuk said.
