Catering for client cost budgets

A growing focus on total cost of investment and advice means it’s increasingly important that investment solutions are designed to support client cost requirements.

It is vital that investment solutions are designed to support a range of cost requirements.

With the rise of passive investment solutions and an increasing regulatory focus on value for money, investment charges are coming under mounting scrutiny. The cost of an investment solution is only one component of the total cost of ownership to a client, alongside other costs such as platform and advisor fees. It is therefore vital that investment solutions are designed to support a range of cost requirements.


As with most purchasing decisions, when it comes to investment solutions there is a relationship between cost and opportunity set. Lower cost generally confines the opportunity set to passive investments and less diversification. Conversely, higher-cost solutions typically provide more active management and greater diversification. Each approach has an important part to play. Cost is only one of many factors that you, as an adviser, have to consider when selecting investment solutions for your clients. But what matters is to ensure that the broadest possible opportunity set is being provided at whatever cost point is suitable for your client.

For example, there is growing availability of passive funds, covering a variety of asset classes and indices. These funds can be a useful tool in achieving low-cost exposure to particular markets. However, if the overall portfolio is not managed actively, how can we be sure that the right mix of assets is in place to deliver the best potential outcome?

Passive investing doesn’t have to mean passively managed portfolios. If we combine passive funds with actively managed asset allocation, clients can still benefit from having investment experts overseeing their portfolios.

Where the investment cost budget is higher, there is room for additional investment styles and asset classes to help deliver better outcomes. So, we can introduce more diversification and employ the skillset of investment analysts and portfolio management teams. Their expertise and resource allow us to seek out opportunities which are likely to outperform the market.

At the same time, recent developments in the ‘enhanced index’ space are leading to new opportunities for clients with a lower cost budget. These enhanced index solutions aim to outperform passive funds, but without incurring active management fees or increased risk.

Further still, we can blend multiple investment styles, deploying each where it makes most sense, while still meeting a low overall price target. For example, where there is a higher probability of active management leading to outperformance, it makes sense to use this. In other cases, passive or enhanced index strategies can be used to generate market or above-market returns at low cost. By intelligently allocating the cost budget, managers can offer investment solutions which genuinely deliver a broad opportunity set without a high price tag.

There is no one-size-fits-all approach to cost. Therefore, it’s important that you, as an adviser, can offer a range of cost options to suit individual client needs. This is where the investment manager needs to play a part.

Good SMA (separately managed account) solutions should provide a range of different price points, risk levels, and investment styles to meet the requirements of a broad set of clients. We believe that, by taking an active approach to asset allocation and using different investment styles to hit different price points, we can help advisers deliver the right solutions and outcomes for their clients.


The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.

The views and conclusions expressed in this communication are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

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Risk warning

Risk Warning

The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.