The investment industry is increasingly repackaging investment products in a way that bundles multiple strategies into broader solutions, a panel of product strategists said on Wednesday.
At the Investment Funds Institute of Canada’s (IFIC) 2012 leadership conference, Kevin LeBlanc, chief operating officer at TD Asset Management, said that bundling has become a popular theme on the product landscape, both at the retail and institutional levels.
“You’re seeing more of this bundling happening,” LeBlanc said. “Standalone strategies are being combined in ways that are either more useful to the client, easier to understand by the client, or suited for a particular client and their needs or risk tolerance.”
Funds of funds, for instance, have become increasingly popular among retail investors in recent years. In addition, a growing variety of life-cycle and target-date funds are designed to provide investors with a bundled, diversified portfolio that will help them meet their long-term goals, noted Gordon Forrester, executive vice president of product and marketing and head of retail at AGF Investments Inc.
“Packaged solutions is an area where I think we’ll see more traction,” Forrester said.
As this trend takes hold, the responsibility for asset allocation is shifting towards fund managers, and away from individual investors, who may be struggling to make these decisions themselves. Essentially, LeBlanc said, advice is increasingly being embedded directly into the investment product, which is something he said investors are asking for.
“Clients of all types want and need more advice these days, and this bundled approach is one way to do it,” he said.
The movement towards bundled products coincides with a broader industry shift towards holistic financial planning, according to LeBlanc. He said financial advisors are more commonly having conversations with clients about their overall financial goals and priorities, and about the ways their investments are helping them reach those goals, rather than conversations about specific stocks and securities, and the short-term swings in their value.
“We have to be talking about those goals and demonstrating that the assets that are put in place for them are appropriate for those goals and [the client’s] risk tolerance,” LeBlanc said. “That’s more tangible to the client.”
Other trends that advisors are likely to notice in the investment product landscape in the coming years include: products designed to minimize market volatility; and products designed with tax-efficiency in mind, Forrester said.