According to a survey of 500 financial advisers, 88 per cent of advisers recognise the need to rebalance a client portfolio on an annual basis. Of these, a fifth say they would evaluate the portfolio a few times a year.
However, of the 88 per cent only 11 per cent have the discretionary fund management status necessary to rebalance a portfolio. This leaves nine out of ten advisers who must seek client approval and potentially incur heavy administration prior to rebalancing their client’s portfolio.
Skandia have launched a new range of risk rated funds which match the expected volatility of different investor risk profiles. These funds are automatically rebalanced to make sure the asset allocation remains in line with the client’s agreed attitude to risk. The Company says this removes the need for an adviser to seek written approval from the client prior to rebalancing a portfolio.
According to the survey, 69 per cent of advisers say they would consider investing some of their clients’ entire investment amount in a risk rated fund. Fifty four per cent say they would certainly invest at least half of their client’s money into a risk rated fund.
Skandia head of investment marketing Graham Bentley says: “Most advisers face a real dilemma when it comes to portfolio rebalancing. When they decide a portfolio needs rebalancing to a new asset allocation most advisers have to write to their clients to get their approval first. Risk rated funds can be an ideal solution because they provide a client specific investment solution that does not incur the additional administration costs of rebalancing.”