Managed solutions: Investment strategies for uncertain times
In the face of market uncertainty, advisors are increasingly turning to managed portfolio solutions to help clients reach their goals
Date: May 19, 2017
We live in an era where it sometimes seems the only guarantee is uncertainty. This makes managing our investments all the more difficult. After all, an economic blip on the other side of the world can have ripple effects that send shockwaves through our portfolios here in Canada.
It’s not just tough for the average Canadian to manage their portfolio. It’s a tall order for financial advisors too, who must wear many hats – from financial planning to retirement income planning to estate planning.
That’s why people like Daryl Diamond, a Winnipeg certified financial planner and author of the bestselling book Your Retirement Income Blueprint, are increasingly turning to what’s referred to as managed solutions.
“The benefits to us are [that] – for lack of a better expression – they allow us to outsource the investment management side of things in a manner that we know will be well-diversified and rebalanced to meet our clients’ needs,” says the advisor with Diamond Retirement Planning Ltd. “We literally have a third party putting together the components of the fixed income and equity side.”
Mr. Diamond notes that there can be risks for financial advisors in doing it all themselves.
“We can’t live and breathe the investment stuff like the money managers do, nor do we have access to the resources they have, or the specialized knowledge,” he says. “If I haven’t been diligent with rebalancing, and then the asset mix is way out of whack with respect to the client’s needs – even if it’s to the positive side with the equities growing in value, it could spell trouble if the markets take a tumble.”
All too often, advisors and clients alike make the mistake of tinkering with a portfolio to keep up with the changing times, says Sadiq Adatia, chief investment officer with Sun Life Global Investments.
“The biggest risk is they try to do so much on so little information about what’s going on in the markets,” says Mr. Adatia, who heads up Sun Life’s investment arm, with more than $15-billion assets under management.
Investing is complex; it is rarely black and white, and markets are unpredictable. Managed solutions portfolios can help ease the workload, says Mr. Adatia.
“These investments take different types of asset classes and bring them together in one portfolio, according to the risk profile of a specific investor,” he says.
These fund-of-funds investments address many of the needs of individual clients without the burden falling on the advisor to constantly monitor and rebalance each client’s portfolio, explains Mr. Adatia.
“If your client is a conservative investor, there’s a management solution that meets that goal, and if they’re at the other end of the spectrum, you can build a portfolio with more equity exposure and higher risk,” he says, adding these portfolios rebalance automatically to ensure the asset mix reflects the client’s needs.
And there is a portfolio for every kind of investor.
“The portfolios, in fact, can change the asset mix to meet the risk tolerance of investors as they age,” says Mr. Adatia. Managed solutions can even meet the income needs of retirees, generating steady, tax-efficient income while providing growth that keeps pace with inflation, he says.
Still, not all managed solutions products offer the same value proposition.
“There are a lot of managed solutions out there that are ‘buy and forget it’ strategies,” says Mr. Adatia. “They’re not really adjusted on a year-by-year basis; there’s no tactical asset allocation, and there are no new asset classes being added regularly to adjust to changing market conditions.”
That’s where Sun Life’s Granite Managed Solutions can add value for advisors and their clients, says Mr. Adatia. He notes that Granite Managed Solutions include “unique asset classes” that advisors often have difficulty accessing on their own. These include Indian equities, global real estate and emerging market fixed income, all of which diversify a portfolio beyond the traditional asset classes of North American stocks, bonds and cash.
When choosing managed solutions, Mr. Adatia suggest advisors and their clients look for solutions that don’t rely wholly on in-house money managers and proprietary mutual funds. For example, Granite Managed Solutions seeks out the best managers in the mutual fund universe, he says. “We look all over the world for the best managers. Our philosophy is putting together an all-star lineup.”
The value of managed solutions boils down to one important quality for advisors and their clients: peace of mind. It’s a benefit that Mr. Diamond says he appreciates.
“To be able to have that aspect of the overall process looked after is a huge thing,” he says. “Managed solution portfolios are a really handy tool to have in the toolkit.”
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