Financial services firm Austock Group (Austock) will roll out a new portfolio model for financial planners, which places direct shares on an even playing field with managed funds.
Austock head of group distribution Steve James said the new offering will be rolled out in the form of a managed discretionary account (MDA) through a number of Australian dealer groups.
“We’ve got commitments with a couple of groups already,” James said.
“I think planners are looking for someone who can help fix the problems that they’ve got and take the stock picking risk and managed responsibility off them. So I think it’s a welcomed relief to a lot of the dealer groups.”
James said the MDA came about after Austock noticed a gap in the direct share financial planning process.
“It’s very hard for the planner to find out what stocks to buy and when to sell,” James said.
“Model portfolios have been very popular. Unfortunately with model portfolios though for a financial planner with a big client base, it is impossible for that planner to keep clients in tune with the model.”
Under a normal model portfolio, the planner has to contact each one of their clients and get acceptance before they make changes to stocks, a process that James describes as incredibly labour intensive.
“What happens over time, and probably over a period of a few years, is that the client falls almost completely out of whack with the model,” James said.
James said the way around this is for financial planners to sign up their clients to put direct shares on a more even keel with managed funds through an MDA.
“On a practical sense it works exactly like a managed fund from an admin and remuneration perspective,” James said.
“One of the other benefits of the MDA style service is that it will help planners to ensure that there are consistent returns across the client base.”
Austock will team up with Financial Simplicity for the new MDA offering.
“Financial Simplicity enables us to manage an unlimited number of portfolios theoretically with an unlimited number of rules and automatically can rebalance.”
Austock will release the MDA model on August 1.
