Using asset allocation tools as a method of defining a client’s attitude to risk, identifying an asset allocation and select funds to match that allocation has become a standard way of working for many advisers in the UK. Such tools are also widely used in both the US and Australia so I was surprised to be told recently by Friends Provident International that other Far Eastern markets are a long way behind these English-speaking countries when it come to the deployment of such technology.
I recently had the opportunity to examine the international planning tools which Friends recently launched and came to the conclusion that there are many elements that could have a lot to offer closer to home.
The new service, which can be accessed via the homepage at www.fpinternational.com, is the first deployment of the new version of the Dynamic Planner software from Distribution Technology, a tool which will be well known to many advisers.
This includes dedicated content designed to meet the needs of the international market and added flexibility which is possible in the less regulated international market. Although UK- based advisers will need to apply a higher level of diligence, than can be achieved with some parts of the system. Overall, I think it is well worth a look.
One of the main changes I would like to see reused is the ability to cater for clients with a non-UK centric investment perspective. I have frequently heard it argued that with western economies in long-term decline relative to the emerg- ence of the new world order, investors might be prudent to focus their investment strategy around wider economic developments.
The software allows users to build asset allocation stra- tegies built around the Hong Kong, European and global markets in addition to the UK centric AA strategy. This means that a wider range of asset classes will be offered. For example, an investor with a European perspective sees pan-Europe rather than UK equity funds. Other asset classes include glo-bal high-yield bonds, multi-strategy hedge and global listed property.
Friend Provident International has worked with six leading fund houses – Foreign & Colonial, BoNY Mellon, JP Morgan, BlackRock, Barings and Investec – in developing these asset allocations. Both Lipper and Morning Star data is included in the fund search engine, with nearly 5,000 funds within the asset allocations being mapped as part of the tool. For new business, the tool can only be used with Friends Provident International products, which is a little disappointing.
While funds can be ranked by currency, the ability to filter them by regulatory authorisation covers only Hong Kong and Singapore. Given that some of the companies’ products cannot actually be sold to UK customers, I would have liked to have seen this extended to include the FSA.
Typically, products of this nature look at a client’s overall portfolio and need an adviser to enter a big amount of information about existing investments before they can be used. While this is desirable for giving holistic advice, there will be situations where the client simply wants a strategy for an individual investment or for focused advice.
This can be easily catered for with the tool and there is even an express option for situations where advisers want to give rapid advice. It is worth bearing in mind that while for UK-authorised funds we are used to data feeds that are fully populated with all relevant funds, finding a feed that can reflect every fund in the world is, I believe, some way off at the moment so inevitably these issues need to be approached market by market.
The goal planner within the tool allows the adviser to allocate a specific purpose to each investment and identify the level of return that will be necessary to achieve this objective. It can cater for lump-sum and regular contribution investments. It is worth noting that the inflation levels that can be factored into the system are far wider, actually up to 100 per cent to allow for the more volatile conditions being experienced in other economies.
The tools for selecting individual funds within an asset allocation work substantially in the same way as UK versions so I will not reiterate these here.
While some of these concepts, which I understand have been designed to meet the requirements of advisers in Far Eastern markets, may seem alien to UK advisers, I can see a number of ways in which we could learn from these processes, particul- arly looking at arriving at a suitable asset allocation for sales that are not intended to allow for an ongoing level of advice. This could be particularly appropriate for less qualified advisers in a post-RDR environment.
Also included within the system is the implementation of Distribution Technology’s multi-language reporting feature which is included within the Suitability Editor. This means that reports can be generated in Cantonese as well as English.
I understand that developments are in hand to make this tool available in other European languages although I doubt they will look as dramatic as generating a financial planning report using the Chinese HAN character set.
Reports are generated using a mixture of mandatory and editable text. Text that can be modified by the adviser appears inside boxes on the screen and a menu on the left-hand side of the page enables advisers to include or exclude preformatted paragraphs for editing with single mouse clicks.
This process enables the delivery of highly customised client reports in minutes that would give the impression to customers that they have been individually crafted over many hours.
Overall, this is an excellent deployment of investment planning tools for international use. It can be used to document important messages to clients in a clear, concise and auditable way. I hope that Friends Provident carries out a little more localisation to enable UK-based advisers to take advantage of all it has to offer, too.