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  • Of all the challenges facing investment managers, one of the most difficult and immediate, is costs and charges. How will clients feel when they see what they’re really paying for a portfolio management service? And what percentage of those clients will have any idea of what it takes to run a portfolio? For most investment managers, being held to account by their cost-conscious clients will be a new and possibly uncomfortable experience. So what options do managers have to make the cost of their services more palatable for clients?

    Big, small, niche or not, efficiency is the name of the game 

    Optimal operational efficiency is as pivotal to a firm’s success as new business. In middle and back office terms, that involves automating manual processes, eliminating double entry of data and abolishing time-consuming reconciliations. Those improvements alone will do much to contain a firm’s expenses. But what of the front office? How can investment managers become more efficient, while striving for the best possible outcomes for clients—and on top of that—reduce their charges to clients?

    Moving from one model to many models

    Among our clients, there is a distinct and growing shift away from ‘hands on’, client-by-client investment management (complete with the associated costs) to model portfolios. Ready-made portfolios not only make administration easier, they also offer substantial economies of scale, i.e. one manager can look after many portfolios—less time spent on management means less cost for the investor. Models also enable firms to service a larger audience than would otherwise be possible; managers gain more control and the risks and financial penalties resulting from poor decisions are reduced. By ensuring that clients with similar risk appetites and investment goals, are invested in similar proportions in similar assets, models can produce more consistent outcomes for investors.

    Bespoke or off the shelf?

    Many of our wealth management clients maintain portfolios based on their proven in-house models; others use our software to provide the tools financial advisers need to build and maintain their own models. Irrespective of their approach to models, JHC’s Figaro platform enables wealth managers to tailor and scale their model portfolio management services so that investors and intermediaries derive the outcomes they need. 

    The tools to build

    Investment managers are unable to allocate the same amount of time to those clients with relatively small portfolios as they did in the past. In the drive to do more for less, the traditional ways of running money are no longer feasible and the long established wealth management mould can be considered well and truly broken. With that prospect in mind, we are further strengthening our established portfolio management platforms by adding new capabilities and enhancing existing functions.  This means that firms will enjoy even more control, be in a position to incorporate further nuances in their models and push down costs. We have also developed new and complementary tools, such as JHC Neon, which by automating the portfolio monitoring process, improves productivity and the firm’s overall efficiency. 

    Getting in shape for the future

    No matter whether your firm plans to grow, consolidate or become a niche player, heightened operational efficiency and greater control are imperatives. The use of models, powered by JHC’s technologies, is enabling investment managers to provide the best outcomes for their clients, better manage their costs, remain competitive and increase their scale of operations.

    In other words, to become the very model of an efficient and cost-competitive wealth management business.

    Andrew Watson – Head of Regulatory Change, JHC