Or something like that. But here’s the thing: if you don’t have discretion and have switched on automatic rebalancing, then that’s what you’ve done. You can’t stop it without asking your clients. If you decide to miss out a rebalance and don’t get permission, you’re acting as a discretionary manager. See earlier naughty step point.
An extra complication
Now flick your eyes back up to the top of this column. I wasn’t bringing the Brexit chat for the joy of political discourse and badinage.
As I write this, I don’t know whether or not we’ll leave the EU on March 29. But I would bet a pound to a penny that there will be some fairly spectacular stock market trampolining around and immediately after that date.
And if you’re a quarterly rebalancer, your rebalance date for the second quarter of 2019 will be… April 1 2019, or to put it another way, ‘the first opportunity to test out just how choppy the waters are after March 29’.
Now you have the benefit of hindsight reading this, and it might all be fine, or we might be leaving later or not at all, or we might all just be living in a giant Jacob Rees-Mogg theme park (double-breasted jackets mandatory). But most companies I’ve talked to in the past few weeks have been extremely clear that to rebalance the first working day after a major market event would be a ‘crazy-go-nuts’ thing to do and that they want no part of it, thank you very much, and if there was an auto-rebalance scheduled they’d be hitting Ctrl-Alt-Del repeatedly until it went away. This kind of puts paid to the technology-making-it-easier part of the advisory model portfolio approach, and brings us back to that discretionary naughty step again.
There’s a huge amount of choice for firms in terms of how you run your client portfolios, and choice is good. There is no regulation that stops you running advisory models, if that’s your thing. But the administration load is getting heavier and heavier, and it doesn’t appear to be too much fun from where I’m sitting.
