According to Mr Wilson, software tools can be useful, but he says the numbers are just the “starting point of the conversation”.
He adds: “People use various bits of software but for us that is just the starting point of the conversation, because there’s a difference between the risk you might be prepared to take and how much you need to meet your financial plans.
“It is quite a holistic conversation between the advisers and clients, where you also need to consider factors like mortgages and school fees.”
The critical nature of suitability is what drives advisers to want to know their clients inside out to prevent the client from doing the wrong thing at the wrong time when matching them with the right funds.
“You need to get the right risk profile; not letting them get excited during the good times and then suicidal during the bad times.”
At Sanlam Four, senior multi-strategy fund manager Mike Pinggera says his team spends as much time with advisers as they require.
“That ongoing relationship; making sure we communicate what we are doing in the fund, what we are thinking and how we are positioned.
"Different advisers will have different processes. Some will have a quarterly review and some may do an annual review and some may do it on an adhoc basis, so their individual processes will really drive their interactions with us.”
Responsibility
Over the years many advisers have outsourced investment decisions, but advisers play a critical role when it comes to assessing the suitability of a portfolio.
John Husselbee head of multi asset at Liontrust says: “The regulatory responsibility lies with the financial adviser and their ongoing know your client analysis. In truth, however, all parties have a role to play in ongoing client suitability.
“For the fund manager or DFM, that involves consistently following their objectives and remaining within the long-term risk corridors for each portfolio. This is usually supported by internal and external investment oversight as well as transparency to the adviser.”
A report from Platforum last year warned that advisers are still on the hook for their choice of outsourcing partner, while DFMs also told the platforms expert it is often difficult to make it clear to advisers that they must take responsibility for suitability, whilst the DFM is responsible for the mandate.
The report added: “Managing investment risk is often a driver for investment outsourcing, but our conversations make it clear that by outsourcing advisers do not absolve themselves from responsibility to the client.”
Some DFMs also suggested to Platforum that in a bull market advisers may be more optimistic that they can manage the investment risk effectively.
