Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
High level of advisors’ clients at risk of leaving
About 30 per cent of investors who use a financial advisor are at risk of leaving their current advisor, according to a report by research firm CoreData. Most of the ‘at risk’ clients had little or no recent contact with their advisors.
The report was based on a survey of 1,525 advised and unadvised consumers over age 18.
CoreData says: “Many Australian advisors are making the fundamental mistake of not keeping in regular contact with their clients. Markedly improving client retention is as simple as picking up the phone, and scheduling in a meeting, but we see that many advisers, especially those with high proportions of clients who are in danger of leaving are failing to do this.
“For advisors who are complacent enough to think that client longevity guarantees an ongoing relationship, think again – close to one third of those classified ‘at risk’ have been using their current advisor for the past 10 years.
“Money plays different roles for different segments in terms of motivating people to switch advisers, with more than two in three ‘bonded’ respondents saying they would not switch advisers if they were offered the same service for less money. In contrast, one quarter of those ‘at risk’ would move straight away.
“Advisors need to promote themselves not only as being knowledgeable but most importantly, they and their businesses as being trustworthy and personable in order to retain clients and to grow their client base with the disillusioned clients from rival advisers.
“Trust is not only the key ingredient in developing bonded clients but is also the key switching driver for ‘Loose’ and ‘At Risk’ respondents – 44.4 per cent of those ‘at risk’ and one third say they would switch for an advisor they could trust. Honing up on interpersonal skills may also be useful for advisers, with close to two in five ‘at risk’ respondents and almost one quarter of ‘loose’ ones saying they would switch for an advisor that they could better personally deal with.”
