The process of gauging the risk tolerance of advice clients and putting them into a static asset allocation is “fundamentally wrong”, according to an Omniwealth senior planner.
“I think historically and this is something we see as fundamentally wrong [too] with the whole process of risk profiling people is that a typical portfolio is assumed to be a static or a constant allocation,” Omniwealth senior financial planner Andrew Zbik told ifa. “I think throughout the entire GFC [Great Financial Crisis] most peoples’ textbook definition of a balanced portfolio did not change,” he added. In light of this Omniwealth internally have a created “for every asset class both a risk on and risk off asset allocation” that changes the balance of clients’ portfolios. “A classic example is a conservative client in a ‘risk on’ environment will want to have about forty per cent of their assets between Australian equities and International equities, whereas in the risk off allocation that will half to say twenty [per cent],” Mr Zbik explains. Omniwealth believes this gives planners the ability to have a “dynamic play between the two risk portfolios”. However, he said this approach has not been widely adopted.“Most of the industry still has it very static. Regardless of what is happening in the environment they still stick to the same asset allocations for clients,” Mr Zbik stated.
A new report has been released this week.
The wrap investment platform has added new managed portfolios to its menu.
The current funding model has been in place for five years.
Get the latest news! Subscribe to the ifa bulletin
Get notifications in real time and stay up to date with content that matters to you.