There are a range of powerful regulatory and commercial considerations that have made many advisers rethink how to manage investment for clients as Andy Miller explains.
Creating and managing an efficient in-house investment process is now more challenging than ever, thanks to the uncertain economic backdrop, and the ever-evolving needs of your clients. But in particular, the introduction of the Consumer Duty, with the requirement to demonstrate that services meet the needs of each client, deliver the right outcome, and provide value, has made running advisory portfolios much more challenging. As a result, the level of expertise, time, and resources required to manage portfolios now far exceeds what was required previously.
The commercial conundrum
To illustrate the current cost pressures on adviser firms, let’s imagine you have a client with £150,000 in an advisory portfolio who pays an ongoing advice fee of 0.5%. That amounts to an annual fee income of £750. With a typical hourly rate for an adviser of, let’s say, £150, this means that if you spend any more than five hours on this imaginary client, they will actually be loss-making for your adviser firm. Faced with such realities, the next question becomes whether you can run an in-depth and efficient investment process, as well as provide a financial planning service, and - under your Consumer Duty obligations - demonstrate it is delivering appropriate client outcomes, all within the five hours allotted?
The silver lining
Some advisers will, of course, have the resources and in-house expertise for this, but for many others, this simply isn’t possible. The silver lining is that outsourcing the day-to-day investment management of your client portfolios can alleviate the mounting regulatory strain on you and your business and free-up your time and resources. This helps ensure your clients receive ongoing advice that’s appropriate to their needs, and that’s cost-effective and sustainable. This improves profitability and can help drive positive client outcomes for your clients.
”You may be delegating your investment management process – but you are not delegating your responsibility to your clients”
Andy Miller, Lead Investment Director, Quilter
Client and adviser benefits
Finding the right investment manager to delegate your investment process to reduces the need for expensive in-house investment expertise as well as the analysis systems and regulatory costs that now accompany the management of client portfolios.
If you are still carrying these costs, outsourcing can deliver increased margins as well as a range of other operational, regulatory, and investment efficiencies. It can also deliver greater productivity by reducing the administration and research required to build, monitor, and report on your in-house portfolios.
A broader and more valued advice service
The prospect of outsourcing your investment services may be a cause for concern for you – especially if portfolio management was previously highlighted as a value-add service to your clients. You may be delegating your investment management process – but you are not delegating your responsibility to your clients. In fact, , outsourcing creates greater opportunities to enhance the service you offer.
