Delivering outcomes for the real world: Q&A with Schroders’ Gillian Hepburn

IFA Magazine: for advisers who are looking to outsource the investment management function, do you think that they should look at model portfolios or multi-asset funds – or do you think it just depends?

GH: Yes, it really depends as such decisions will always come down to the individual client’s needs. It’s all about suitability and meeting their required outcomes. And they’re all different.

Of course, advisers will know that there are many differences between model portfolios and multi-asset funds. There are capital gains tax considerations for a start. For example, if you’re holding a model portfolio outside of a tax-sheltered environment such as an ISA or a pension, you’ve got to take account of that.

There’s also the inability, sometimes, of model portfolios to hold a broad range of investment assets underneath. This could simply be because of platform availability or even just the technology of the platform. If you look at combining investment trusts and ETFs, for example, it’s much easier to do some of that within the fund structure.

And there’s also just general availability on platforms of model portfolios as the providers have to go through a legal process to make the models available.

Interestingly, when it comes to cost, I don’t think that’s such a differentiator any longer because many of the model portfolio providers like ourselves have removed VAT from the management charge.

These are just some of the ways in which the two options are different.

Look-through reporting also used to be a challenge in terms of multi-asset funds where a client could argue that they’d just been invested in a single fund as they see only one line of stock on their investment report.

I think we’re all getting much better at delivering that kind of look-through reporting to all the underlying holdings and using technology to deliver better quality reporting for clients all round.

At the end of the day, it’s just about ensuring that when advisers are developing a CIP (centralised investment proposition), that they have that full range of options available to them. In this way they can ensure that they are able to meet clients’ requirements, whether that be in a model portfolio solution or in a multi-asset fund.

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