The story of Linked Investment Service Providers (Lisps) has been one of constant evolution. Their true benefit today is not seen so much in the characteristics of the actual product, many of which are now to be found in competing products, but in the value add they offer both the end user and the financial intermediary explains Mike Galloway, STANLIB's Retail Managing Director.
Lisps are entering their 25th year as a South African financial product.
"The transactional benefits of the Lisp platform are well regarded in the market place, but by now are nothing new. The biggest trend, and the real value of a Lisp, is the migration towards value-add tools and services they provide for the client himself and his financial adviser, in enabling the former to manage his portfolio and the latter to more effectively administer his book.
"The primary advantage they enjoy comes from consolidated reporting and greater detail. In the past, an individual would have to laboriously review his accounts with various unit trust management companies and himself number crunch to get the complete picture. A Lisp provides this to him at a single glance," says Galloway.
"While that's a significant benefit, the real advantage comes from managing the asset allocation strategy. Over time, differing performances through various bull and bear markets alter the initial asset allocation as values naturally change, and Lisp consolidated reporting enables that to be reviewed very easily. Investors can now see the underlying asset allocation and can manage the portfolio in accordance with Regulation 28 where required.
"It provides a snapshot view. It also enables more accurate performance monitoring, as cash flows in and out of the account are transparent and therefore no longer skew performance," explains Galloway.
An issue that continues to plague the industry is the discount given (or fee paid) by fund providers to Lisps that aggregate investors' capital and offer the product providers' funds as investment options on their platforms. Historically these were for the most part retained by the Lisp. Fortunately this is changing and Galloway says that most Lisps not only disclose but also pass on any savings enjoyed or payment received directly to the investor.
"The other major trend affecting Lisps is that most - though not all - pass on the rebates to their clients and are also more robust about negotiating as large a rebate as possible. In either case - whether the Lisp passes it on or keeps it for itself - where the Lisp has negotiated a rebate they are normally fairly transparently disclosed. The investor can typically see for himself whichever is the case," adds Galloway.