In light of Consumer Duty and the downward pressure on costs across the industry, there are significant tailwinds for Managed Portfolio Services (MPS), especially on platform, and Multi-Asset funds. However, there is still a demand and requirement for bespoke portfolio management for many clients, argues Peter Stewart, Senior Strategic Account Manager | Associate Director, Waverton Investment Management.
While the platform route is justifiably popular for advisers seeking access to investment propositions, clients with specific requirements or preferences may find a custodied portfolio a more suitable solution*.
Income requirements
We believe a custodied portfolio can offer further alignment with individual income requirements compared to a model portfolio on a platform.
Bespoke portfolios are tailored to meet the specific financial needs and considerations of the client, allowing for personalised strategies to generate consistent income. This is especially valuable for clients with unique objectives, such as those relying on income for retirement or needing tax-efficient solutions, such as optimising allowances for dividends or interest.
While such outcomes are possible on platforms, bespoke portfolios can provide a higher degree of control and adaptability, ensuring income requirements are met with precision and in alignment with personal and evolving financial goals.
Tax advantages and CGT liabilities
When assets are held by Waverton, for example, rather than on a platform, together with the adviser, we are able to take a more nuanced and proactive approach to managing clients’ tax affairs. For example, we can automatically subscribe to an ISA each year or manage investments transferred in-specie within a Capital Gains Tax (CGT) budget.
A custodied portfolio allows for efficient use of the annual CGT allowance by crystallising gains in a controlled manner or avoiding exceeding the allowance when necessary.
Furthermore, directly managed portfolios enable us to handle CGT-constrained portfolios by transitioning holdings into a Waverton bespoke or model portfolio over time.
Additionally, a bespoke mandate can be structured to be as tax advantageous for clients as possible. For example, by holding higher yielding assets (bonds and real assets) in the tax-free environment, such as the ISA for high-rate taxpayers. The lower yielding equity and absolute return assets could then be held in a General Investment Account (GIA).
Alternatively, it may be the client or the advisers preference to shelter capital growth within the tax wrappers, which can also be accommodated and we may also be able to hold products, e.g. SIPPs or Offshore Bonds, in our custody, which might not be available or desirable on platform.
Further tax considerations for specialised clients
For clients with more complex tax considerations – such as US persons, Resident Non-Domiciled (Res Non-Dom) individuals, offshore clients, or those returning to the UK – a bespoke portfolio is uniquely positioned to manage the transition between jurisdictions. It enables careful handling of UK situs and non-UK situs assets, ensuring tax compliance and efficiency. These scenarios often require advanced planning and management to navigate the interplay of multiple tax regimes, safeguard gains, and optimise tax outcomes.
Moreover, for offshore clients or those using structures such as trusts, tailored portfolio management can help align the investment strategy with the client’s long-term tax and estate planning objectives.
Dedicated portfolio managers
Our custodied solutions provide access to dedicated Portfolio Managers (PMs) who are available to both the adviser and the underlying client. For clients who prefer direct communication and performance updates from the PM, this service is more easily facilitated when Waverton has custody of the assets.
PMs also offer enhanced flexibility by phasing cash into the market over agreed time periods, ensuring greater control for advisers and alignment with the client’s investment objectives.
MPS Direct
While a bespoke portfolio is by definition, customised to the client, a directly held MPS is also able to offer a more personalised portfolio, adjusting the weights of the component funds to suit the clients wishes. For example, if a client has a large exposure to property, then they might wish to hold a lower weighting in the Real Asset Fund than the mandate guidance. Equally, a client may have fixed income exposure elsewhere in their portfolio, and therefore would prefer exposure purely to equity and alternatives.
Digital benefits
At Waverton, if the portfolio is held directly, then the client is able to take advantage of our digital account opening process and our online portal, where they can find up-to-date valuations of their holdings. These valuations, for Bespoke and MPS Direct, provide a full look-through to the underlying portfolio. Financial advisers are also able to take advantage of an Intelliflo integration – giving them information on the assets that they are monitoring in one back-office system.
* For these clients, Waverton has two primary options; a fully segregated discretionary solution or our MPS in direct custody. Both approaches provide the flexibility required for clients with more specific requirements or preferences.
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