If asset allocation is one part of a valuation, allocation and asset management service, what service is the average investor actually receiving from asset allocation services in general.

Take advice that merely invests the individual investor in an index investment.

Buying the index, while being an allocation of assets, is not an asset allocation service, since the responsibility for asset allocation has been passed to the index. 

Many services provide a fixed allocation between cash, fixed interest and equities over time, rebalancing as and when the allocations change due to market movements. 

While this is also an allocation of assets, it is not technically an asset allocation service, since the allocation is not derived from current price relationships, itself dependent on investment discipline.  

These fixed component allocations also suffer from return contamination. As markets fall, low risk assets are transferred to equities and vice verse when markets rise, to maintain allocation. Fixed long term portfolio compositions are also at odds with the universe of client liability and risk profiles and changing valuation relationships.  What this means is that as financial needs change, so should the structure of the portfolio.

Importantly, these services cost next to nothing to provide the asset allocation advise and management, so why is the client often faced with the high annual management expense rations of mutual funds and the additional cost of WRAP structures.

See costs and value for money for further information and insight.

The modern day multi fund is a well researched blend of active managers whose performance just about manages to match its benchmark index.  While this is also an allocation of assets it is hardly an asset allocation service.

Since these portfolios are structured to mirror the index in composition, they have no more exposure to areas of value than the main market index. There is also no significant sector deviation for the same reason.

The benefits of style are tempered by the constraints of balanced allocation, itself subject to constant rebalancing and contamination of return.

In fact, the attempt to reduce the performance risk profile of active management has constrained the return benefits while leaving investors exposed to full market risk. If we add in the related costs of the portfolios (advisors remuneration etc) total return may be lower than the index.

Most investors would be just as well served with the index despite the very high quality of research 

All allocation improperly managed, allocated and valued will increase risk, costs and reduce returns.