According to its Tech and the Investment Proposition report, which surveyed over 50 senior executives in technology, operations and investment teams, investment managers still rely on in-house systems based on spreadsheets, Word documents and SharePoint to track multi-million-pound investment decision-making.
The report also found that inconsistencies in platform interfaces and functionality add risk and cost to managing portfolios on platform. Discretionary fund managers (DFMs) are in some cases limiting platform availability to avoid compromising their proposition. Furthermore, a limited fund universe and the inability to consistently access ETFs has meant that DFMs often have to compromise from their ‘best ideas’ and revert to more ‘vanilla’ versions of portfolios.
Also described in the report was that DFMs are often unable to control the entire client journey, instead relying on platforms to make funds available and to ease the rebalancing process. This increases the risk of clients being out of market and of data entry errors. NextWealth claimed that DFMs feel they lack influence with the platform, making it difficult to push for change.
Another common bugbear called out by DFMs came in rebalancing. This related to inconsistencies across platforms, with each having a slightly different layout and different procedures for each platform increases the risk of error. The risk mentioned most by interviewees was someone in-putting information into the platform incorrectly. The other risk was someone leaving the business that is familiar with the platforms meaning a new individual would need to be trained up, increasing risk of error.
Heather Hopkins, managing director of NextWealth, said: “We have seen a rapid rise in discretionary managed portfolios on platform but the tech underpinning these solutions is starting to fray. We expect to see a continued rise in assets in discretionary managed portfolio services.
“To support that growth, DFMs and large financial advice businesses need better solutions to reduce risk and increase efficiency. The biggest challenges are in working with platforms, in particular rebalancing portfolios across different systems and inconsistent fund availability.”
The research is supported by Ada Fintech – Redington’s technology business, Allfunds, Bravura Solutions, Multrees and SS&C Technologies.
Andrew Back, chief commercial officer at Multrees, said: “With the rapid rise of both DFM and adviser model-portfolio-solutions on platform, it is more important than ever for platforms and tech providers to step-up, not just their technology, but also their service solutions to meet these changing requirements.
“There is absolutely no justification for DFMs or advisers to be forced to limit their propositions due to platform operational discrepancies or inefficiencies.”