Trends in wealth management: a shift to managed asset solutions

One of the most exciting developments in the financial services industry recently has been the trend toward managed asset investment solutions. As an enhancement to the more traditional relationship between advisor and client, managed asset solutions shift the focus from the selection of investment products to a highly individualized approach of selecting and maintaining an appropriate investment strategy and portfolio.

According to a recent report by Investor Economics, Canadian investors are embracing managed asset investment solutions at a remarkable rate: managed assets grew steadily to reach $173 billion at mid-2002, accounting for 30 per cent of all fee-based assets. What’s more, despite an overall investment environment that was extremely difficult for investors, managed assets expanded by an impressive 65 per cent from the end of 1998 to mid-2002. By comparison, the market composite, representing stock and bond performance, gained just 8 per cent in that time.¹

Behind this phenomenal growth is the recognition by investors that this innovative approach is an effective investment alternative for reaching diverse financial goals.  In fact, manag asset solutions offer many distinct benefits to investors.

Features of Managed Asset Solutions
For the investor, managed asset solutions combine the personal service and attention you already receive from your Investment Advisor with the expertise of some of the world’s leading investment managers. In exchange, you pay a fee based on the value of the assets in your portfolio. The key features of managed asset investment solutions include:

Customized professional management: Managed asset solutions normally start with a comprehensive, objective assessment of the investor’s situation. Your Investment Advisor looks at your existing investment portfolio and helps develop your personal profile, establish your financial needs and identify your life goals, as well as define your time horizon and risk tolerance. With your goals forming the basis of an individually designed investment portfolio, you get ongoing consultation and service, along with help in identifying and maintaining the best asset mix and investment managers for meeting these goals.
 
Access to leading investment managers: A hallmark of managed asset investment solutions is access to the expertise of leading investment managers from around the world whose skills are ordinarily out of the reach of individual investors. That’s because such managers often require high minimum asset levels, such as the assets held by pension funds and other large institutional investors.

Predictable costs: In return for the services that comprise a managed asset investment solution, you pay a single, all-inclusive fee covering all transaction and administrative costs. Such fees are normally charged to your account on a quarterly basis, with the exact cost determined by the asset classes you hold, and calculated as a percentage of your assets in the program. One important advantage of this predictable cost structure versus paying a commission for each transaction is that you can better plan for your goals: you’ll know how much you pay ahead of time.

Next page: An Individualized Approach

An Individualized Approach
Managed asset solutions offer a disciplined approach to personalized investment management. For example, with CIBC Wood Gundy Investment Consulting Service (ICS), one of two managed asset investment solutions offered by CIBC Wood Gundy, the process starts by working closely with your Investment Advisor to develop your personal profile. “Most clients have an existing relationship with an advisor, and the advisor is presenting this [a managed asset investment solution] as another option, a newer solution,” says Sean Boulton, Group Product Manager, Investment Consulting Service.

Investment Consulting Service draws on a team of experts from across various divisions of the CIBC organization and takes advantage of the valuable assessment tools available to these professionals.

Only after performing an objective and independent assessment of your needsÐa process that includes your responses to a very detailed questionnaire — does your advisor build and recommend a customized asset allocation, selecting suitable investment managers and strategies to fulfill that asset allocation. “The Investment Advisor works with the client to choose suitable asset classes, to decide on the proportions to invest, and to choose which investment managers they want to hire,” explains ICS’s Boulton.

As well, to ensure you’re on track for reaching your long-term goals, your portfolio is continually managed, monitored and adjusted as needed. Importantly, consultation is an ongoing process since movements in financial markets, changes in the economy, and even changes in your own personal circumstances might necessitate updates in your portfolio’s asset allocation.

Rigorous Manager Selection Process
Along with proper diversification and suitable asset allocation, solid investment management is a key component of any successful investment plan. For their part, ICS’s due diligence partners, CIBC Oppenheimer Consulting Group and CM Investment Management, employ a rigorous process for identifying and monitoring leading investment managers from Canada, the U.S. and around the world. ICS managers have proven track records and meet a long list of criteria. They are leaders in all major asset classes, including domestic and international equities, as well as fixed-income securities.

Prospective managers are scrutinized objectively by the due diligence team, starting with a look at public filings and moving far beyond to in-depth background information that may be less widely available; staff turnover rate, plans for expansion and whether the firm has been subject to any regulatory or legal actions are some of the considerations. “It’s only after that point they even start looking at performance. Performance should be the end-result of having a consistent style and a consistent methodology they’re following time after time,” says ICS’s Boulton. And the scrutiny doesn’t stop there: qualifying firms are under constant and ongoing review, he adds.

Next page: Comprehensive Reporting

Comprehensive Reporting
With any undertaking, knowing where you stand makes it easier to get where you’re going. With a managed asset solution, your Investment Advisor communicates regularly with you and with the managers you’ve selected. ICS, for example, gives clients two levels of regular reporting: in addition to a monthly statement summarizing your holdings, transactions and the value of your portfolio (such as you may already be used to receiving on your investment accounts), every three months you’ll also receive a consolidated statement of portfolio performance, commentary from the investment managers, an overview of your holdings and comparison of your investments to the relevant benchmarks.

These quarterly reports go beyond the information on your monthly statement to give you a detailed level of disclosure that is instrumental in keeping you on track to meeting your long-term investment goals. What’s more, regular meetings with your advisor to review your strategy and identify any life changes will ensure you always make appropriate modifications to your investment plan.

Is a Managed Asset Investment Solution Right for You?
When you choose a managed asset investment solution, you select the services and products you need and decide how to pay for these services. Importantly, you maintain your trusted relationship with your Investment Advisor, working together to ensure that the asset mix and the managers you’ve selected in your individually managed account continue to reflect your investment philosophy. 

Whether this approach to investing is right for you depends on a number of factors.  Investment Consulting Service, for example, is available to discriminating investors with at least $100,000 to invest in each of its investment strategies; and with a portfolio size of $500,000 or more, investors can ensure effective asset allocation and proper diversification, in addition to customized professional management in registered and non-registered investment accounts.

As well, your personal situation and investment personality are important factors. “For investors who don’t have the time, the inclination or the expertise — or a combination of them — to manage their own investments, it’s worth it to know that [for] a fee based on the assets in your account, you have the expertise of your Investment Advisor, backed by a deep team of professionals who are concentrating on your investments, as well as access to extraordinary managers from around the world,” says Sean Boulton. For many investors, it is an excellent option, he adds. “It’s no less valuable than hiring a lawyer to draw up your Will or an accountant to help with your taxes.”

To learn more about how a managed asset investment solution can help you reach your investment goals, speak with your CIBC Wood Gundy Investment Advisor; call toll-free: 1-800-563-6623; or visit the CIBC Wood Gundy website at www.cibcwoodgundy.com

¹The Fee-based Report, Summer 2002 Edition, Investor Economics
For an asset-based fee, you have the expertise of your Investment Advisor, backed by a deep team of professionals who are concentrating on your investments, as well as access to extraordinary managers from around the world

Despite an overall investment environment that was extremely difficult for investors, managed assets expanded by an impressive 65 per cent from the end of 1998 to mid-2002.

You get ongoing consultation and service, along with help in identifying and maintaining the best asset mix and investment managers for meeting your goals.