Welcome to our first quarterly Model Manager update. 

This update is designed to help managed account model managers better run their models and grow their managed account offering on the Netwealth platform. It includes important information, product updates and happenings at Netwealth. 

Important information for your models

We hope the following information provides greater clarity on how you can add new managed funds to existing models as well as how rebates can be facilitated on managed funds:

1. How we facilitate fund manager rebates

Our managed account structure supports managed fund rebates that have been negotiated with underlying fund managers. The following information provides important details on what rebates we can facilitate within your managed account models and the process:

Rebate contract requirement

Netwealth will implement a rebate agreement directly with the Fund Manager, noting the terms of the rebate that will apply and the method of calculation.

For Private Label Models (i.e. not available on the public menu)

Rebates can be established on managed funds held within a model(s) for all clients in that Private Label. The rebate will be applied as a single percentage of FUA held within the managed fund. In the event the negotiated rebate contains a threshold or tiered structure, you will need to advise Netwealth of the new rate to apply if the threshold is achieved.

For Models held on the Netwealth retail approved product list (APL)

Rebates negotiated on managed funds held in models on Netwealth's retail approved product list will have the rebate applied on all platform holdings within that managed fund, excluding Private Labels.

Investor Rewards

Netwealth provides clients with access to the Investor Rewards program which contains a 10bps rebate for investors who hold certain funds on the platform (currently 76 funds). These arrangements will apply over and above other negotiated rebate arrangements.

Calculation

Rebates are calculated quarterly and invoices are sent to managers approximately 2 weeks from the end of the applicable quarter. Rebates, once received, are applied as a cash rebate that are deemed as taxable income.

How to request a managed fund rebate

Please email managed fund rebate requests to investmentalerts@netwealth.com.au stating the managed fund, code and negotiated rebate amount to apply.

 

2. How you can add new managed funds to existing models

When requesting to have new managed funds added to an existing model, please be aware that this process can take up to 10 business days to complete. If the asset is not already approved by the trustee it may also require Investment Committee approval.

It is important to note that the process and timing is a regulatory outcome rather than simply being one of fund approval. Netwealth has a regulatory responsibility under the Corporations Act 2001 to provide a Product Disclosure Statement to the end client at or before the time any offer is made. In practice, this means we are required to:

• Firstly, update the Managed Models Profiles document to list the additional managed fund that may be contained in the Model
• Secondly, we must be satisfied that the client has been given the opportunity to both receive the PDS and also to read it.

Any requests for new funds should be emailed to investmentalerts@netwealth.com.au. Requests should include the APIR Code, Fund Name and the Model/s which it will be used within the model. Information on any negotiated rebates should also be included.

 

3. 2018 annual review timetable

We are currently planning the annual 2018 review timetable for model managers. We will be in touch with you prior to the end of the year with a proposed review date. You will also be contacted 6 weeks prior to the review with an outline on what information we will require for the review.

 

 

Platform enhancements that may impact you

Netwealth is committed to continually enhancing our platform to improve the experience for users. Some of our recent updates that may be relevant to you are:

1. Model performance reports now available on an 'Income receivable basis'

We have recently enhanced our reporting so performance reports for your managed models can be produced on an ‘Income Receivable Basis’, in addition to a ‘Cash Receipts Basis’, via the model manager portal.

To access these reports, select the document icon to the left of the Model code. Then select 'Asset Performance.'

As a minimum, performance reports should be run 2 weeks following the end of month to ensure any asset distributions are accounted for.

(Note: Income receivable reports will not currently work if the start or end date of a report coincides with a distribution date that is not June 30. We have added further information on the report and are endeavouring to have this corrected.)

 

2. Monitor tracking error with performance reports

Model managers are able to view their model performance on the Netwealth Platform using the performance shadow, which is based on an ideal client who has $100K fully invested into the model. These reports are available via the model manager portal.

This information could be used to compare your own performance data in order to determine the level of tracking error and potentially highlight if any implementation issues exist. Please be aware that tracking issues may arise due to the following scenario:

• When approving a model we help ensure that clients’ investments closely track their selected model/s. We also help to determine a minimum investment amount that allows clients, even if they are only investing the minimum, to be fully invested across the model. Client accounts have the ability to set a ‘minimum trade size’ (that is the smallest trade per security) that will result from a rebalance, although advisers typically adjust this figure upwards to reduce the number of small trades that can occur in their portfolio.
• When managers trade very small positions within their models they may not be immediately reflected in client’s accounts given the minimums trade sizes in place. This may cause a tracking error to develop over a series of small adjustments until the overall trade becomes big enough to override their minimums. The effectiveness of these small model adjustments can be reduced at the client level.
• Clients also have the ability to customise their model assets via substitutions and holds. This will impact the client's actual performance against that of the Model.

 

3. A new managed account forecasting and planner tool to assist advisers with the transition of clients into managed models

To assist advisers with the transition of clients into managed accounts, we have developed a forecasting tool that displays how the holdings in a client's portfolio would be affected should an asset or portfolio be transferred into one or more managed models. The transition tool models the assets that would be retained and the trades that will be required to align with the models current allocation.

Following further discussions with advisers, we plan to extend the functionality of this tool to allow advisers to model impacts for clients who do not have existing investments on the platform, to help them transition books of business from external platforms. 

The impact of making this more broadly available to advisers will be the potential for them to utilise the tool to try and retrofit clients into a model, without investing into the model. Given the Netwealth structure, where all assets are held at platform level, the ability to determine underlying model assets is only likely if a single model is selected.

We believe the likelihood of advisers using the managed accounts planner tool as a way to expose underlying model assets is unlikely, but would like to understand if you have any concerns in Netwealth making this tool more broadly available.

Please email Steve Thomas at stevet@netwealth.com.au or contact on 0438 270 300 if you wish to discuss any concerns.

 

4. Other recent platform enhancements

You can find more information on our latest enhancements such as concessional cap reporting and wholesale certificate alerts here.

 

Our latest marketing activities to support the growth of managed accounts

As a supporter of the managed accounts industry, we produce a range of content and initiatives intended to educate and expand the awareness of managed accounts to advisers. Some of our latest activities are listed below:

1.  A downloadable guide designed to help advisers implement managed accounts into their business

In this guide we aim to help advisers better understand the different types of managed account structures and their pros and cons. This guide also looks at several considerations a business should give thought to prior to implementing a managed account solution. To download click here.

 

2. An online article centre with a collection of articles, case studies and other managed account resources

Access a collated collection of articles, case studies and resources designed to help advisers understand the role managed accounts can play in their business and the important factors to consider prior to their implementation. To access, click here.

 

3.  Read about the future of managed accounts with Matt Heine

Matt Heine shares his thoughts on what the wealth industry wants from managed accounts in the future and where he sees the next phase of their evolution. Read article.

  

4.  We're a sponsor of the IMAP InvestTech event in early December 2017.

Netwealth is proud to be a sponsor of the upcoming IMAP InvestTech - Portfolio Management Technology conference, an event where advice, investment and technology meet. For more information on the InvestTech Conference click here.

 

For any questions or suggestions please Steve Thomas via email at stevet@netwealth.com.au.