Improved Investment Performance
If you use risk based model portfolios, you’ll know that changing a fund means preparing an ROA for every client, and although not mandatory, it’s best practice to seek client consent before implementing the change. This creates three costly problems:
- Because of the time to receive client consent and implement the change, you end up with clients with the same risk profile in different portfolios.
- Clients experience performance leakage because it takes too long to implement the change.
- Administering ROAs is expensive and drains valuable staff time.
SMAs completely solve these problems, it has been shown that avoiding implementation leakage can improve clients’ investment performance by 3% – 6% p.a.
Rapid changes to protect Portfolios
You never have to worry about how many changes you need to make to a portfolio, particularly with the volatile markets we are experiencing now, where it may be beneficial to make multiple rapid changes to protect portfolios.
Lower Costs to Clients
- We know that using wholesale funds under an SMA mandate generates around 30 bps in fee rebates from fund managers that go directly to your clients’ cash account.
- There are costs of 10 – 20 bps to manage SMAs, but net costs to clients will reduce compared with model portfolios.
- Taking out the costs of continuous ROAs including following up outstanding client responses can save $50,000 – $100,000 p.a. in practice administration costs.
Increased Dealer Revenue
- Many Dealers have developed model portfolios to reflect their own view on markets and portfolio themes. You can receive fees for this valuable input, by becoming a member of the Wealthtrac Investment Management Team for your SMAs.
- Wealthtrac can build in an investment management fee of up to 10 bps for the Dealer, payable each month.