Discretionary Managed Portfolio Services - Case Study - 2013

by Fraser Donaldson
Insight Analyst - Wealth Management

March 2013

Our case study on discretionary Managed Portfolio Services provides a valuable benchmark for advisers undertaking due diligence on any discretionary proposition.

Following implementation of the Retail Distribution Review (RDR), advisers are continuing to review their business propositions. Part of the review process is likely to focus on how client investment portfolios are run, with outsourcing of the investment process being an attractive proposition for many.

While multi-manager has historically been the outsourcing solution of choice for advisers, discretionary management has become an increasingly popular alternative over the last couple of years. Many discretionary managers can build portfolios designed for individual clients on a bespoke basis, but minimum entry levels are quite high for this, very often in the region of £250,000.

Another option that advisers may find more preferable is discretionary management on a model portfolio basis, known as the Managed Portfolio Service (MPS). Here, portfolios are constructed by the discretionary managers with specific segments of clients in mind and it is up to the adviser to select the most appropriate solution for their client. All clients in an MPS will, proportionately, have the same portfolio.

These portfolios have been constructed in order that the minimum entrance requirements can target a more mainstream audience. Advisers may therefore find that this investment process permits an outsourced solution for a wider range of clients than bespoke discretionary management, whilst still employing the skills and expertise of discretionary managers.

While MPS investment vehicles may be an attractive proposition, the fact that many have been launched relatively recently can make analysis and due diligence difficult to conduct.

Our case study on discretionary Managed Portfolio Services gives an in-depth, real life example of how one discretionary manager runs its discretionary solution. This provides a valuable benchmark for advisers undertaking due diligence on any discretionary proposition. This case study focusses on:

• Investment processes
• Fee structures and charging models
• Service levels
• Performance measures and benchmarking
• Key support positions within investment teams

Specifically, in order to bring the subject to life, we have analysed the Managed Portfolio Service of Brooks Macdonald Asset Management.