The digitalisation of portfolio construction – Part 2

Julien Jarmoszko

In this chapter, we will focus on the customisers, for whom building a portfolio for a client is a holistic process, centred on a detailed analysis of the clients’ objectives and constraints. Digitalisation can help remove the hurdles that have so far slowed customisation.

There are four main reasons for this. First, account size has often dictated the level of service received, and smaller clients have felt being pushed into unsuitable or unwanted products. Second, asset managers have mostly focused on the performance of their products, highlighting a short-term focus when their clients needed more of a longer-term view. Most of the asset managers’ narratives remain on performance, even nowadays. Third, clients may not (or cannot) divulge all their financial information to advisors. Without a full picture, a customised solution cannot be crafted. Last, but not least, automating many individual processes independently has failed to yield substantial cost benefits. As with the alpha chasers, a complete overhaul of the portfolio construction process is needed to harvest significant savings.

Looking at the processes of new entrants, such as robo-advisors and outsourced chief