Charles Stanley implemented BITA risk's "monitor" and "star" modules to help preserve investment manager autonomy while ensuring robust suitability and risk monitoring across its 32 offices and £20 billion in client assets. This gave Charles Stanley improved oversight of portfolios and evidence of risk management, which has attracted new clients and driven growth. While introducing more oversight, the system also aimed to give investment managers "freedom within a framework" by documenting reasons for anomalous portfolios rather than necessarily constraining investment decisions. The implementation was carefully managed to gain staff buy-in, and investment managers see the system as a useful tool for both existing clients and winning new business.
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“Freedom within a framework” – How Charles Stanley
brought risk management to the fore.
Charles Stanley: BITA star with monitor
We’ve ended up with a system
that does exactly what we
need it to do... A very good tool,
not only for servicing existing
clients but also winning new ones.
2. BITA star with monitor deployed across 32
offices serving over 30,000 client accounts,
totaling some £20bn assets under management
(data correct as at the time of writing).
Charles Stanley has stayed close to its private
client investment roots by maintaining a
decentralised, bespoke investment proposition
at a time when mounting compliance and
cost pressures are pushing many institutions
the opposite way. But with the spotlight on
suitability, how does a firm preserve the
autonomy of its investment managers while also
evidencing robust suitability and risk monitoring?
And how does it do so cost-effectively when – as
Charles Stanley does – it is running some £20bn
of client money across a network of 32 regional
offices?
For Charles Stanley, the solution was to add
BITA risk’s “monitor” and “star” modules to its
existing Figaro investment platform (the former
for suitability and risk monitoring; the latter
for risk-profiling and generating investment
proposals). But while one might assume this
choice followed exhaustive “beauty parades” the
decision was actually very simple, explained ICT
Director Michael Bennett. For Charles Stanley
customisation, collaboration and integration
were king.
To illustrate, ICT Director Michael Bennett
explained that Charles Stanley needed to be able
to cater for investments which are harder to
risk assess (like newer funds lacking historical
performance data or relatively new equity issues.
Here, BITA risk worked with Charles Stanley to
develop proxies which were then validated by the
investment house. More broadly, the technology
firm has collaborated closely with Charles
Stanley’s investment managers to ensure the final
iteration of the system is as intuitive as possible.
“It was in attitude, however, that BITA risk
really impressed,” said Bennett. “It was their
willingness, and skills, to make their system
integrate with other systems.” he said, conceding
– as one would expect – that this was not
entirely unproblematic. But while the focus has
been on augmenting existing systems, rather
than a root and branch overhaul, the BITA risk
implementation has already started to deliver
benefits which go far beyond compliance -
namely, in attracting new clients who can see
how risk is measured rather than it being an
abstract concept.
Risk-conscious clients
Charles Stanley has found that being able to
demonstrate the highest standards of risk
monitoring is already proving to be a real driver
of growth, according to Chris Harris-Deans,
a Director of Private Clients and lead on the
BITA risk project. In his view, “it’s probably
the biggest selling point for our charity clients –
some of whom we probably wouldn’t have won
without this kind of evidencing”. He also notes
that intermediary clients take great comfort in
“knowing portfolio risk is taken care of”.
That’s not to imply, of course, that risk was
not taken care of previously. As Harris-Deans
“Freedom within
a framework”
– How Charles
Stanley brought risk
management to the
fore.
pg
2/4.
It was in attitude, however, that
BITA risk really impressed... It
was their willingness, and skills, to
make their system integrate with other
systems
It’s probably the biggest selling
point for our clients - some of
whom we probably wouldn’t have won
without this kind of evidencing.
3. pg
3/4.
explained, “It’s not necessarily about doing
new stuff, but articulating why we do it and
how we do it.” As such, the BITA risk’s overlay
has evolved from being an internal tool “to an
external tool to show we’re doing things right”
So what does “right” now look like? In
simple terms, it is identifying when portfolios
might be drifting away from mandate. Yet, as
Harris-Deans points out, this is more about
documenting the reasons behind a (seeming)
anomaly rather than necessarily taking
investment managers to task.
“There are many reasons why a portfolio might
look odd,” he said. “It might be a certain way
because of CGT constraints, for example,
but there have to be appropriate reasons for
it.” “Effectively we have 100% confidence
now since clients’ portfolios have to be either
adherent or explained,” continued Harris-Deans,
adding that analyses can be run at a branch,
department, investment manager or client level.
Charles Stanley’s compliance department and
management team are doubtlessly very happy
about this level of oversight, but what of the
firm’s investment managers?
One step at a time
Sensibly, Charles Stanley has taken its BITA risk
rollout at a measured pace rather than going
for a “big bang” deployment. Monitor was
introduced in 2012 and allowed to bed in for
a year before Star went live in 2013; also, new
clients were put on the system before investment
managers were asked to start ploughing through
the existing accounts to which the rollout applies
(execution-only accounts are excluded).
We can assume careful management of this
administrative burden has gone a long way
towards securing – and maintaining – staff buy-
in. But, as with all things technological, a pleasing
user experience is also hard to discount. “We’ve
ended up with a system that does exactly what
we need it to do,” said Harris-Deans, adding that
the firm’s investment managers overwhelmingly
see BITA risk’s technology as “a very good tool,
not only for servicing existing clients but also
winning new ones”.
It seems then, that new systems and tighter
management oversight can be welcome
developments if they help investment
managers to be more entrepreneurial. Tailor-
making portfolios is a big differentiator when
commoditisation is rapidly becoming the
norm for mid-tier clients. Yet it should also be
remembered that a decentralised model can
be very attractive to the kind of investments
managers who are able to make a selling point
of their investment track record. Preserving
the charms of a bespoke model is not just
about appealing to clients; just as immaculate
suitability and risk monitoring isn’t just about
avoiding regulatory censure but gaining clients’
confidence too.
Freedom within a framework
“Freedom within a framework” is how Harris-
Deans sums up the ultimate aim of the BITA
risk implementation – a neat phrase but one
which nonetheless encapsulates the tricky
balancing act of keeping clients, staff and the
regulator happy (while trying to also to grow
and keep costs down). While Harris-Deans and
Bennett believe it will take a couple of years
for the full return on their firm’s investment
to manifest, both report that the signs are very
encouraging. Indeed, Charles Stanley has already
begun integrating BITA risk’s modules into its
Wealth Dynamix CRM system, so more efficient
client servicing - and even more intelligent
marketing - would seem to be just round the
corner.
We’ve ended up with a system
that does exactly what we
need it to do,” said Harris-Deans,
adding that the firm’s investment
managers overwhelmingly see
BITA risk’s technology as “a very
good tool, not only for servicing
existing clients but also winning
new ones.”
