Canada Life's new range of multi-manager portfolios, operated by Insinger de Beaufort, is the latest in a steady stream of manager of manager launches.
The case for recommending such products should be appealing to IFAs who see their role primarily as financial planners but do not have access to the research resources to offer ongoing advice on portfolios of individual funds. Keeping pace with fund manager turnover and assessing how investors should respond is a huge commitment, so contracting this out provides a convenient solution.
Furthermore, the Sandler review expressed concern about the lack of understanding of many IFAs about the importance of asset allocation. Academic research suggests that asset allocation decisions account for around 90 per cent of the return in a portfolio, leaving just 10 per cent down to investment selection and timing. Contracting out the asset allocation process to a multi-manager service should be seen as an attractive choice for many IFAs.
The downside with multi-manager products is an extra layer of charges. Paying total annual costs of 2.5 to 3 per cent certainly takes the shine off.
In this respect, the Canada Life IdB fund range looks to be very competitive. Fund costs range from 1.3 to 1.5 per cent which apparently includes the costs of the underlying funds in the portfolio. Even if purchased with the accompanying select investment bond, for which there is an additional 0.35 per cent charge, the costs are relatively inexpensive compared with many other multi-manager offerings.
Jason Hollands is deputy managing director of Bestinvest