The result of these challenges is that, depending on the response, different funds with different trading and reporting mechanisms are created.
In short, not all smoothed or with-profits funds are made equal. And understanding where they are different is not always obvious.
As more companies go on platform, advisers will have even more due diligence to do.
Here is a rundown of some of the questions independent financial advisers should be asking when they investigate the smoothed with-profits opportunity.
1. Are they platform agnostic, or are they restricted to just one platform?
Some smoothed funds are available on the independent platforms. But others are only available on just provider-owned platforms because of their complexity.
As advisers know first-hand, platform choice can be a big decision. Some opt to access just one platform, to avoid the inefficiency of using multiple tools, whereas others would argue a multi-platform approach is the only way to achieve true independence for themselves and their clients.
When it comes to smoothed and with-profit funds, it is important to ask whether the products are available on multiple platforms, or restricted to just the providers own one.
The answer could indicate how much flexibility the product will have.
Funds that are platform agnostic are more likely to be traded just like an Oeic or unit trust, giving it the same flexibility as any other fund that is available on that platform.
The administration is all done by the platform, which avoids duplication or delays in processes as well as allowing the fund to be added to multiple platforms without constraint of administration.
2. Can they be blended with other assets to create bespoke portfolios?
The smoothing mechanism of any fund will dictate how easily traded those assets are and whether you can use them effectively on platform with other funds.
Some provide daily pricing, daily smoothing and daily trading, so advisers can get the instant information they need.
When your clients want to access their investments they can do so immediately – there is no need to wait for days or even weeks, unlike through the Novia platform, for example, where withdrawals are paid out within standard platform timescales.
That is important because being able to blend smoothed funds with other assets in bespoke or model portfolios is a big reason for using platforms in the first place.
3. What are the trading rules?
Another consideration should be the trading rules on the funds.
Ideally, it needs to act like any other Oeic or unit trust in a platform environment. This gives the same advantages of more familiar funds.
By doing this, advisers can ensure that they are giving their clients what they need, when they need it, and providing best-in-class service.
