Over half of IFAs outsourcing investment management

The onset of RDR is set to boost the popularity of DFM and investment management firms even further: among intermediaries who already outsource to a DFM, over a third (36%) plan to increase the number of client portfolios managed by a third party.

Unsurprisingly, investment performance is top of mind for IFAs. When selecting a DFM, an overwhelming 90% of advisers reported that track record was vital; followed closely by the assurance that the core client relationship would not be threatened (87%). A transparent, repeatable and scalable investment process is key to advisers (83%). Keeping costs reasonable is also important to a significant majority (79%).

However, advisers still have concerns about full discretionary fund management, particularly in respect to ownership of the client and the overall client experience; when asked what has dissuaded them from outsourcing any of their client portfolios to a DFM almost three quarters (72%) cited a lack of control over the investment process and 68% were unwilling to delegate responsibility to a third party. Over half of those surveyed (57%) were concerned about increased charges.

In the main, advisers and planners are clear that clients find most value in the up-front advice and planning process. When asked to identify the areas where clients derived most value from their relationship with an adviser, the most important factors were the advice process and the development of a financial plan, identified by almost four in ten (38%) and (36%) of respondents respectively. This was followed by help with articulating goals (31%).

Despite the debate raging between active and passive by many investment firms, two thirds of IFAs prefer to offer clients the best of both active and passive. Only 2% believe that low-cost passive investments offer most value to their clients.

Mark Rockliffe, Head of Intermediary Sales at Heartwood Investment Management said:

“This research clearly underlines that using a DFM or investment manager is rapidly growing in popularity among IFAs, and the onset of RDR will stimulate the market even further.

“However, there is still concern among some IFAs about outsourcing to a DFM, and it is important that both parties fully understand how a strategic partnership can enable both parties to concentrate on what they do best. IFAs can focus on cultivating relationships with clients: offering the advice and planning clients value most and working to win new clients, while outsourcing to an investment manager can deliver the disciplined investment management process that can help to streamline an IFA’s business and increase scalability.”

Heartwood is a multi-award winning boutique investment management firm with over £1.4 billion of funds under management and administration (as at the end of May 2012).

Heartwood delivers a consistent investment approach through tax-efficient funds, models and via a full discretionary service, offering financial adviser firms a business solution for all their clients. With a global multi-asset investment style, Heartwood offers a choice of investment strategies designed to suit a range of risk appetites. Since their launch in December 2009, Heartwood’s comprehensive selection of Multi Asset Funds has attracted more than £609 million, over 49% of discretionary assets under management and 90% of discretionary clients.