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Two-way street

Investment companies are keen to provide an onslaught of information to get business but few firms keep IFAs and clients up to date on how and why funds are invested and their performance

One thing which has always impressed me in the financial services industry is our creative marketing.

Financial services companies are good at producing sales aids and marketing literature to entice new clients to invest with their company. The quantity and quality of information available to potential investors is vast and, as an industry, we are good at getting our messages across to this group of people. But once a client has parted with their money, it is a different story. Ongoing communication and the information available to existing customers is often quite poor.

What is the norm? Your clients invest money with a company. They can expect an annual statement which will tell them how much they had last year and what they have this year. They will get a copy of the annual accounts for the fund or trust or Oeic and if they are lucky they will get a standard marketing bulletin giving a snapshot of the fund’s performance taken from some point in time before these documents are sent out.

Communication is two-way. It is not only this information which is sent out to clients and advisers but is also the information that is available for them to access themselves. Clients and advisers are often directed to the company’s website for further information but how often do you go to a website that tells you it has been recently updated, say, within the last month? Not very often, I fear. What is the point of having instant access to information which is out of date?

In a world of open architecture, where so many companies offer access to so many external funds, collecting information on all the funds a client may have in their portfolio can prove to be a frustrating exercise. Some companies are better than others at pooling all this information together. Even then, however, much of the information is out of date. The information should be updated regularly, at least on a monthly basis to be of any use.

You should also expect fund performance statistics to be made readily available so you can talk your client through how well the fund is doing – or if not, it can form the basis of discussion for possible switching.

Comparative fund performance would be useful too. How is the fund performing relative to other funds in the same sector, either by quartile, or actual ranking (say, 18th out of 135 funds in the sector) over different time periods. This will help in your discussion with the client. Is the fund underperforming or is the sector having a difficult time or have you picked a winnerManagement-style boxes, such as those used by Morningstar, can be useful in ensuring a spread of risk by a variation of styles within the portfolio.

The top holdings in a fund can also be useful when assessing its performance within the portfolio and having up-to-date information is essential. The stocks in a fund can change on a regular basis – if not the actual stock, then the amount of each stock held.

When constructing a portfolio with your client, you will have ensured that the funds you were picking did not hold too many of the same stocks. Funds can change and you may find that one of the funds in the portfolio has altered the bigger stocks within the fund and your client could be overexposed to some stocks. This is one of the more important areas of portfolio review.

The stocks in the fund can also explain why it has out-performed or under-performed .

To bring it all together, a snippet of wisdom from the fund manager often helps put all of these details into context. Ideally, this will have a review of the fund’s recent experience and an outlook on what the fund manager expects to see over the near future. Again, this is only useful if it is updated regularly.

It is important to consider this requirement for clear communication and that it is in a language that is easy for the client to understand.

Some providers are good at collating this information, keeping it up to date and making it accessible to advisers and clients but some are not and there is a general need to improve on the information that is available.

An adviser’s job is difficult enough. The last thing you want to do is spend all your time looking for information that should be available at the press of a button.

Providers go to great lengths to produce quality information to entice new customers to invest but a little more time could be spent communicating with customers once their investment has been secured.


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