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Advisers explain the 'mum test' for multi-asset funds

Advisers say their main reasons for using multi-asset portfolios are simplicity, adaptability to market changes and a disciplined approach to rebalancing.

Advisers explain the 'mum test' for multi-asset funds

Advisers say their main reasons for using multi-asset portfolios are simplicity, adaptability to market changes and a disciplined approach to rebalancing.

Research by New Model Adviser® has revealed the top fund groups being used by advisers for multi-asset portfolios. The top three were Royal London Asset Management (RLAM), Vanguard and Aviva Investors.

We found that when advisers use multi-asset as standardised solutions for client portfolios they use them heavily, allocating half of a client’s portfolio to them on average.

Respondents to our survey of more than 200 advisers said brand and corporate strength are ‘considerably important’ when selecting multi-asset funds. Advisers rated investment performance, investment style, cost and investment risk control as the top four factors looked for in multi-asset funds.

Advisers also told New Model Adviser® one of the key reasons they have chosen multi-asset funds for their clients in the first place is their simplicity.

Practise what you preach

Explaining why he has invested some clients’ funds in the Vanguard Life Strategy funds, Darlington-based Postcard Planning director Rohan Sivajoti says they are selected for their simplicity as they are easy to explain to clients. ‘They pass the “mum test”,’ Sivajoti explains. ‘My parents are invested in them, I invest in them. It is really important for advisers to act in this way and practise what you preach.’

Sheffield-based Hamnett Wealth Management director Jonathan Rowley and Andrew Elson, director of West Yorkshire-based Berry & Oak share a similar reason for investing in the RLAM multi-asset governed funds. ‘We chose it because it is an off-the-shelf, simplified solution,’ Rowley says. 

Adaptability to market changes is another key area that has been identified in relation to these funds. The ability of funds to automatically alter alongside market shifts and periods of instability was also a plus point for IFAs.

In the due diligence process, Sivajoti says in addition to seeking funds with a broad diversification, his firm uses funds that have static allocations and that will ‘automatically rebalance’.

Ultimately, says East Midlands-based Balance Wealth financial planner Krupesh Kotecha, multi-asset funds that have a ‘disciplined approach’ to rebalancing are successful in remaining in line with investors’ risk profiles and will be preferred by advisers.  

On the RLAM funds, Rowley says: ‘We know it will be fit for purpose if market conditions change.’

Advisers say they are selecting multi-asset funds because they cater to a broad range of clients and provide consistent performance outcomes matched to risk appetites.

‘We invest in the [RLAM] governed portfolio range for some clients, as it is good in terms of risk and they can choose equity content,’ Rowley explains. ‘If a client is looking for a balanced portfolio, for example, it will automatically invest based on this risk-reward spectrum.’

Covering all bases

The Vanguard LifeStrategy fund also meets these requirements, Sivajoti says. He stresses the importance that a fund is able to remain consistent for clients invested in it, whether in the 20%, 40%, 60% or 80% equity allocation.

‘We recommend these funds across the board [for all types of client], as they have every element of risk,’ Sivajoiti adds.

‘The only time we would look at other investments would be if a client’s investment was significantly larger and they didn’t want to be invested in just one fund’.

With a multitude of multi-asset solutions widely available, it is crucial for advisers and investment managers to define what factors are most important to them. It is clear that for clients with lower wealth, and indeed across the board, these funds are easy to navigate, reliable in market cycles and deliver consistent performance.

 

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