Asset managers divided over adviser investment influence
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Using data from advisers in order to influence investment decisions is an issue over which asset managers remain split, despite a recent report from a major regulator which praised firms for analysing in "smarter ways".
The Financial Conduct Authority published a report last month which detailed the ways in which asset managers go about looking at and making use of information gleaned from their fund distributors. These distributors, which can include financial advisers, can help to ensure asset managers are able to meet the expectations of their investors.
Of the firms that were looked at in the report, five of them were investing in "smarter ways," according to the regulator, which meant that they were analysing the data received from their distributors in order to gain a better understanding of the sort of client that was investing in their funds.
However, many of the firms were said to still have doubts over whether the data received from distributors does make the job of the fundhouses easier by educating them about their clients. Some even suggested that the receipt of information could even lead to in-trend following, which is a real negative in the sector.
Director of marketing and distribution at Baillie Gifford, James Budden, told FT Advisor that such companies must ensure they have a full understanding of their customers and look to “suitably satisfy their needs”. However, Mr Budden did question whether the current techniques that are being used, including customer profiling, do indeed lead to the best outcomes for investors.
He went on to say that all companies must ensure that they are being "honest with themselves” and make sure to dodge the temptation to raise assets by "launching funds just because they are currently popular," the publication said.
Indeed, many managers prefer to go with what they believe rather than following another party's advice regarding investment decisions. "There are lots of smart people who sometimes get things wrong, and I’m not smart enough to know when the smart people are wrong, there is too much noise," said David Coombs, manager of the Rathbone multi-asset portfolios.
Mr Coombs told the publication that he would “neither follow the herd nor stand in front of it”.
Other sector experts, such as Royal London Asset Management’s head of the multi-asset, Trevor Greetham, told FT Advisor that he believed communicating with advisers was crucial when it came to designing his new range of portfolios.
“I have a lot of dialogue with financial advisers, investors, policy makers and market strategists on an ongoing basis, so the interactions with financial advisers and others can help inform your own market views," Mr Greetham said.
Goldman Sachs Asset Management’s head of international third party distribution, Nick Phillips, agrees with Mr Greetham, saying that his firm was undoubtedly a "big data driven investor”.
Mr Phillips confirmed that Goldman Sachs looked at 26 million news articles every year in order to gain a more detailed understanding of its clients, as well as making use of one million research analyst reports and 288,000 earnings call transcripts. He told the publication that, in his opinion, investor sentiment was “enormously important” when it came to opting for locations within which to allocate funds.
Many sector experts believed that there was little point to creating and launching a new fund that was not then going to be pushed to sell, with the general consensus being that, while trends are linked to what has been sold in the past rather than what may be sold in the future, if some within the fund management industry are able to spot a gap in the market and levy it, then that could well prove to be a positive for the firm itself and for that firm's customers.