5 questions to ask about an investment manager

When considering an outsourced investment service, there are several features an adviser will naturally want to investigate – starting with their capabilities and their long-term performance record.

But other, perhaps less obvious characteristics will also have a significant impact on the way a service delivers. To lay the best foundation for a sound partnership that will generate the best possible opportunities for your clients, it’s worth digging a little deeper.

Whether you’re an active or passive investor, the following can give you a clearer idea of the conversations you should be having with a new prospective partner – or an existing one.

1. How do they define passive investment?

It’s true that passive tracks indexes while active seeks to outperform, but within those broad categories lie a range of investment approaches and philosophies. By our definition, ‘passive’ doesn’t have to mean ‘inert’.

At RBC Brewin Dolphin, we’re chiefly known as active fund managers. In fact, we offer both active and passive investment options – and a range of blended products, a dynamic fusion of active and passive investments. These active and passive offerings are offered at varying levels to accommodate different risk levels, providing the best of both worlds for a diversified portfolio.

Critically, our passive products benefit from an element of active management.

Our active offerings, such as our Managed Portfolio Service (MPS) and the six risk-rated Voyager Funds aligned to MPS, are led by experienced active managers seeking alpha. Our passive products, such as Passive Plus MPS, use exactly the same asset allocation as their foundation.

We adjust our tactical allocation at least once a month (and at other points as required) to reflect market conditions. This allows us to fine-tune our portfolios towards a bullish or bearish view. Because these adjustments apply to our entire range, they allow for active management of lower-cost, passive funds.

Up to 85% of portfolio returns are derived from asset allocation. So, active allocation, implemented using passive instruments, is potentially valuable for clients who are passive-inclined.

It’s also worth noting that our active, passive and blended offerings all feature the MI Select Managers (MISM) fund range, which was launched in 2018 to offer clients improved investment outcomes. Through these funds, we can negotiate better terms via different fund houses than a headline fund is able to achieve.

For some managers, passive simply means static. We believe passive investment and frequent, dynamic market adjustment are entirely compatible.

2. What’s their operational capacity?

There are two reasons behind our decision to review allocations every month. The first is the fast-moving nature of today’s markets. Revisiting allocations bi-annually, or even quarterly, would risk too much portfolio drift.

The second reason is simply because we can. We have the resources to make thorough, informed reviews on a frequent basis, and we believe it’s an indispensable element of delivering the best opportunities to your clients.

Our 30-strong research unit comprises some of the most accomplished specialists in the field. One team invests huge energy and expertise in researching equities while a separate team brings forensic focus to analysing and monitoring funds. Not every firm has this kind of firepower and agility.

We believe investment managers should be open about the fine detail of their operational capacity as a precursor to partnership with financial advisers.

3. Do they provide total cost transparency?

Although it is a regulatory requirement for fund managers to publish their costs and charges, it’s not always easy for IFAs – let alone clients – to get full clarity about transaction fees and incidental charges.

We’re committed to providing total transparency for advisers. We publish all our fees and the entire portfolio holding (not just the top 10). Be sure you have the full lowdown of a firm’s total costs – as opposed to just the headline rates.

4. What value are they providing for the cost?

Cost-value is inherently linked to each of the above-mentioned considerations. Cost transparency supplies one part of the picture while the scale and frequency of the services delivered for those fees supplies the other part.

A DFM fee, for example, buys you investor expertise, but also operational capacity. If you pay a lower fee but the manager carries out portfolio adjustments only twice a year, or on an ad hoc basis, it’s for you and your clients to determine the cost-value equation.

5. Are they accessible?

Any successful partnership is rooted in strong relationships. That’s why we place a huge emphasis on providing personalised support whenever IFAs need it.

Don’t take our word for that. As one adviser firm puts it: “Nothing is too much trouble, and a member of the team is always at hand to assist, whether this be a simple admin query or a joint meeting with our client and one of RBC Brewin Dolphin’s investment managers.”

From our Head of Asset Allocation and Chief Strategist to our Managed Portfolio Service (MPS) team, our experts are available to provide advice and information related to our essential investments – whenever you need it.

At RBC Brewin Dolphin, we combine personalised service and local expertise with the strength and stability of a global financial institution. Talk to us today about how we can take the pressure off your firm – we deliver the investments so you can concentrate on giving the best advice.

This is for FCA authorised individuals only and should not be distributed in whole or part to retail clients. The value of investments, and any income from them, can fall and you may get back less than you invested. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

RBC Brewin Dolphin is a trading name of RBC Europe Limited. RBC Europe Limited is registered in England and Wales No. 995939. Registered Address: 100 Bishopsgate, London EC2N 4AA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

® / ™ Trademark(s) of Royal Bank of Canada. Used under licence.

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