India’s IIFL Wealth Management has seen some 50% of its clients on its IIFL-ONE platform choose discretionary portfolio management since the platform’s launch in late 2018, according to Sandeep Jethwani, managing partner and head of advisory at group entity IIFL Investment Managers.
“We are agnostic towards their choice between the advisory and discretionary models, but I’m seeing a rising preference for the latter,” Jethwani told Asian Private Banker, adding that, over the past few months, clients have committed to move some US$1.2 billion to US$1.3 billion in assets under management to the process-based IIFL-ONE platform.
Institutionalising a range of investment options for high net worth clients, the IIFL-ONE model seeks to obliterate the conflict of interest between the wealth manager and the client by offering a transparent ‘all-in’ fee structure, as opposed to the traditional commission-based transaction model. “In India, most of the wealth management business is distribution-driven,” Jethwani said. “It is basically products being sold to clients, and essentially the wealth manager earns commission out of that. Most of the product manufacturers did not have a zero-retrocession option available in which the advisor or broker did not earn commissions.”
According to Jethwani, this remains a “big challenge” in the country, given that the drawback of the distribution-driven model is that it can create conflicts of interest between a wealth manager and their clients.
“Our objective was to move as many clients as possible to a goal-based and process-oriented approach to the way we manage their money and really align the portfolio with what the clients’ expectations are, what the risk-return level is, what the tolerance to volatility is and so on,” he said.
For IIFL WM, the IIFL-ONE platform has opened an arena for its new technology initiatives in portfolio reporting and analytics but leaves it up to clients to decide on whether they wish to make the switch to the IIFL-ONE platform.
From the wealth manager’s perspective, Jethwani has seen a rise in the productivity of wealth advisors under the discretionary model, given that the portfolio analysis and construction is done by a “centralised team”.
“We are offering to clients two models,” Jethwani reiterated. “One is what you call a non-discretionary model where we set up an investment policy where essentially the client makes a go or no-go decision on every instrument. And the second was a distinct discretionary upgrade, which is where our team really decides on individual product ideas.”