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What advisers are saying: The irony of multi asset investment

Phil Wickenden Technical Area 200

In 1996 Alanis Morissette released “Ironic”. If you don’t know it, the song describes various life situations followed by the two questions “Isn’t it ironic?” and “Don’t you think?” The problem with the song is that most, if not all, of the given examples do not constitute either situational or literary irony.

For example: “A traffic jam when you’re already late; a no-smoking sign on your cigarette break; 10,000 spoons when all you need is a knife… Isn’t it ironic… don’t you think?” Well, no, actually.

Those are unfortunate situations, sure Alanis, but they are not typically what one would define as ironic. Ten thousand spoons when all you need is a knife in the canteen of a Stainthorp Knives factory… Now that would be ironic.

As is the growing complex­ity of selecting and monitor­ing multi-asset funds, given that one of the principal drivers of their rapid uptake has been advisers’ desire to strip out costs and risks from their investment advice propo­sitions.

The commercial reality of trying to run a profitable IFA business is changing. The costs of meeting an ever increasing regulatory burden allied to the potential revenue challenges anticipated post-RDR mean more and more advisory firms are looking to outsource ‘non-core’ activities.

It is not really very surprising, in light of these developments, that more firms are seriously reconsidering whether investment execution is, after all, a core activity. And large advisers try not to be too dogmatic.

If fund management groups can demonstrate superior (consistent) performance then most advisers do not have fundamental objections to considering multi-asset funds. Indeed, most expect that this approach is likely to become more pronounced over the coming year.

However, having been convinced to move towards the outsourcing route for a number of reasons (but in no small part due to the time, cost and expertise involved in making asset allocation and fund decisions), advisers are now finding it increasingly taxing to root out the most appropriate multi-asset funds for their clients. They are obliged to compare not just performance but range of assets, level of true diversification, process and cost in a market awash with “me too” funds and devoid of any clear benchmark.

Ironic, don’t you think?

That the song “Ironic” is devoid of irony in any of the illustrations Alanis offers is, I grant, in itself ironic and may just validate the song from an artistic standpoint. Glad we cleared that up.

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Phil Wickenden is managing director of So Here’s The Plan phil@soherestheplan.com

P Wickenden Quotes 20Dec

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