Advisers increasingly outsourcing investment

Implemented Portfolios practice development manager Katie Gill said that over the past six months, she has seen a “significant increase” in the number of financial advisers looking to outsource “non-core” business functions such as investment management.

However, an informal poll conducted during an IP webinar found that 62 per cent of the 28 respondents were concerned about outsourcing as they were unsure “how they would justify their advice fees”, while a further 50 percent were concerned about investment performance.

“What’s interesting is how many of these concerns link back to an issue of control for the adviser,” Ms Gill said.

“Advisers are looking for a more efficient way to implement investment advice for their clients, but they want to ensure that they retain control over the process and that the client experience and outcomes are first-rate.”

Ms Gill said that while advisers feel they are able to control the investment process by picking fund managers and shares, this is not always the case.

She said that by outsourcing, advisers can often increase efficiencies and scale in their business and reduce costs.

In addition, advisers are able to focus on their core task of strategic decision-making.

“Many advisers believe that by picking fund managers or shares for their clients they are in control of the investment process,” Ms Gill said.

“We would argue that the opposite is actually the case, and advisers are realising that they in fact have little to no control over fund managers and when the market turns they are forced to choose between firing the fund manager or persisting with the traditional ‘buy and hold’ approach.”