Extract from NextWealth June Newsletter – sign up here to get it in your inbox.

I am not a pessimist but an optimist in armour: I have so much hope for technology to help the wealth-management industry reach more customers, yet at every step, there is a morass of messy systems and manual processes that hold things back.

I recently had the pleasure of speaking to around 50 DFMs and operations and investment heads in large financial-advice businesses. There has been a rapid rise in recent years of discretionary MPS. Model portfolio services were seen as a fantastically scalable business: manage a portfolio once on platform with hundreds—nay, thousands—of customers. Yet the reality is that every platform has slight nuances that make managing those models an operational nightmare.

The challenges and solutions are laid out in gory and glorious detail in our “Tech to Manage the Investment Proposition” report, sponsored by Allfunds, Bravura Solutions, Multrees, Ada Fintech (Redington’s technology business) and SS&C.

Download our free “Tech to Manage the Investment Proposition” report

Some implications of the current approach include:

• Inconsistent processes resulting in higher cost and risk of error.
• Constrained investment universe force DFMs to substitute funds, resorting to “next best” options and compromising their best ideas. DFMs say this leads to a more “vanilla” offering.
• DFMs and financial advice firms are unable to reliably report to shareholders on gross and net flows of discretionary MPS on platform.
• Financial advice firms struggle to get consistent data on costs and charges to comply with MiFID II reporting requirements.
• Custody statements lead to disjointed client journeys.

Find out more about possible solutions in our report, available for download here.

Heather Hopkins