Generate has launched a separate investment management business aimed at taking much of the investment workload off financial advisers.

The new business, GoCIO, provides a Discretionary Investment Management Service (DIMS), handling portfolio construction, manager selection, trading, rebalancing and ongoing monitoring.

It launched the service at the Independent Financial Advisers Association conference in Christchchurch on Friday.

GoCIO is targeting three groups: advice firms without a DIMS, firms running their own DIMS which want to outsource some or all of the investment function, and firms already using another outsourced DIMS provider.

There is no minimum FAP size and a firm can sign up without having existing DIMS clients. GoCIO says it will consider minimum individual portfolio sizes on a case-by-case basis rather than imposing a fixed threshold.

Generate chief executive Henry Tongue says the aim is to free advisers from much of the investment administration and governance work so they can spend more time with clients.

“The first thing advisers should get back from GoCIO is time. Fund research, due diligence, portfolio construction, rebalancing, trade execution, ongoing monitoring, investment governance and reporting can all sit with GoCIO, freeing advisers to focus on their clients and growing their businesses.”

What will it cost?

GoCIO's portfolio management fee, including custody, is capped at 42 basis points and reduces for larger balances.

The fee includes access to the Adminis portal for advisers, administration staff and clients, as well as adviser support including portfolio reviews, training and business development.

Fund management fees within portfolios are additional and depend on the mandate, while the advice fee is agreed between the adviser and client.

Advisers set their own advice fee, either as a flat or tiered rate, and GoCIO can collect and pass this on to the adviser as part of the DIMS administration.

GoCIO says this is not a payment or incentive from it to advisers for placing clients into the service. Rather, it is the client's advice fee being collected and passed through to the adviser.

Model and bespoke portfolios

GoCIO offers model portfolios as well as bespoke portfolio solutions.

Portfolios can include Generate-managed investments and funds from external managers. Generate says all managers, including itself, are subject to the same research, approval and monitoring process.

Its investment process centres on active asset allocation, portfolio construction within defined risk budgets and manager selection overseen by an Investment Committee which includes independent investment professionals.

Head of GoCIO Jeremy Ward says outsourcing the investment function gives advice businesses access to a process that requires a dedicated team to operate.

“I have run money as a portfolio manager and I have hired managers to run it. Sitting on both sides teaches you what a good manager actually looks like from the inside, and what the pitch never tells you.”

Ward says managing portfolios is an ongoing job rather than simply selecting a group of investments.

“A good portfolio is more than a collection of good investments. Every holding has to earn its place against everything else it sits with, and the whole thing has to keep earning it as markets change.”

Adviser retains client relationship

The service has been structured so advisers retain ownership of the client relationship.

Advice and suitability remain the responsibility of the FAP. Once a client accepts the investment proposal, investment decisions are made by GoCIO under its own DIMS licence, separate from the FAP's licence.

Advisers and clients have direct access to the investment team, while GoCIO handles the underlying investment management and reporting.

Clients receive quarterly portfolio reports, annual investment and performance reports and year-end tax reporting. Advisers can add their own branding and commentary to reports.

Head of Distribution Simon Leach says advisers will deal directly with the people responsible for managing their clients' portfolios.

“Advisers deal directly with the people responsible for the investment function, so they can ask questions, provide feedback and understand what is happening in their clients’ portfolios.”

Client assets are held by independent third-party custodian Adminis NZ, which GoCIO says has $32 billion under custody for 140,000 investors. GoCIO makes investment decisions within the agreed mandate but does not hold client assets.

Bigger ambitions

GoCIO says its longer-term ambition is to give advice firms of any size access to what it describes as institutional-grade DIMS portfolios.

It sees the business as an adviser partner rather than simply a product provider, with Leach and business development manager Matt Laing working directly with advice firms.

GoCIO has already been working with a foundation group of FAPs to develop and refine the service ahead of its wider launch.