Advisers shifting focus beyond asset allocation

In a white paper released on Friday titled The Outsourced CIO: The Client Experience Dividend, Mason Stevens said financial advisers are placing a strong emphasis on proving their value beyond asset allocation as their primary development focus in the near future.

The paper, which was produced in collaboration with the Ensombl advice community, introduces research highlighting a growing trend of financial advisers outsourcing their investment management capabilities.

The platform provider said the outsourced CIO (OCIO) model has gained traction among advisers, freeing up time to engage with their clients.

“As the investment landscape becomes more complex and uncertain, advisers are finding it increasingly difficult to optimise investment outcomes while also staying abreast of mounting compliance, sustainability, and professional development challenges,” said Jacqueline Fernley, chief investment officer at Mason Stevens.

“This paper therefore comes at a critical juncture, drawing on the experiences of Australian wealth advisers who have successfully leveraged external investment capabilities, enabling them to optimise investment outcomes while streamlining processes, and ultimately deliver a superior client experience.

“This research will help advisers navigate the changing landscape and unlock new avenues for growth. Ultimately it will help them deliver a superior client experience and drive increased client appreciation of the value of their advice.”

The Mason Stevens report added that with outsourced investment management increasing among financial advisers, many of the benefits are equally applicable to smaller wealth firms as they are to institutional managers.

“The complexity of investing means that the reviewing of investment policies and asset allocation during quarterly investment committee meetings no longer cuts the mustard. These are high impact decisions,” the report said.

“An outsourced CIO provider, by contrast, works to establish an improved, robust governance process for organisations, with the provider assuming daily oversight of all investments. Outsourced CIO providers will have the superior resources, expertise, and implementation capabilities to provide day to day attention, with complete transparency.”

Mason Stevens said wealth practices are better served focusing on its client’s holistic financial goals and its overall business objectives rather than day-to-day investment portfolio management.

“A reputable outsourced CIO provider will not only have a dedicated team of in-house specialists to provide daily oversight and strategic advice, but also offer improved access to best-in-class investment managers on a global scale,” the report said.

“Outsourcing investment management should also open up access to a much wider range of specialised investment opportunities, including alternatives and private placements, allowing advisers to meet the needs of more sophisticated clients.”

In an article published on ifa, managing director - head of adviser and intermediary solutions Australia at Russell Investments, Neil Rogan, explained the concept of an OCIO and the reasons advice businesses might utilise them.

“Financial services organisations partner with outsourced CIO providers to satisfy a range of objectives, including portfolio customisation, fiduciary requirements, enhanced governance structure, decreased volatility, risk reductions and lower costs,” Mr Rogan wrote.