When we talk about a bespoke service, we usually think of something prestigious, something that’s made specifically for us.
This is the same in the discretionary management world, where a bespoke portfolio has been seen as the pinnacle of private client investment offerings.
When it comes to outsourced solutions, advisers have also viewed a bespoke offering as something special to recommend to their very best clients - that is, typically their largest clients by portfolio size.
However, is a bespoke portfolio something that best suits the adviser’s clients with the most money to invest? Or, rather, is it more suitable to those clients with complex needs and requirements? Experience does teach that these two things are not necessarily linked.
What we have been seeing more frequently are the larger discretionary manager firms providing clients with a ‘tailored’ approach to portfolio management, coupled with an individual relationship management experience, under the bespoke services banner.
This article will explain the differences between truly bespoke and tailored solutions. It will also look at who these solutions may be right for and why.
What is bespoke?
What Defaqto means by bespoke, in terms of outsourcing solutions, is a highly personalised service, a service where the client has a one-to-one relationship with their specific investment manager. The manager crafts an individual investment portfolio which is unique and matches the client’s specific investment goals, time horizons, risk tolerance and outcomes.
In other words, a bespoke solution is an investment portfolio usually built from scratch with only one particular client in mind. It is managed on an ongoing basis, with full discretion to change assets as and when appropriate.
The service can also cover other features, including:
• Setting a portfolio benchmark which is discussed, explained and agreed with the client
• Regular face-to-face client meetings with the assigned investment manager during which the managerexplains the management of the portfolio and reaffirms client circumstances
• Opportunities to determineinvestment preferences, such as ethical, which mightexclude tobacco, arms manufacturers and mining stock,or geographical limitations, such as not investing in Russia
• Tax management using capital gains tax allowances and ISAs
• Individual and specific portfolio reporting, including consolidated tax documents
• Where direct equities are held, the opportunity to participate in shareholder meetings and to receive individual reports and accounts is, sometimes, still offered
• Online access to portfolio information and transaction history
This traditional definition of an individually mandated portfolio service is also recognisable to many advisers.
However, at this year’s Defaqto DFM Conference, a number of points were raised that could question this view and might change the way some advisers think of using discretionary management services for their clients.
More specifically, as a number of adviser clients share similar needs and wants from their investment portfolios, they can be grouped together and provided with very similar portfolios.
