Improving client outcomes

clock • 2 min read

PARTNER INSIGHT: For many advisers, outsourcing to a multi-manager or discretionary fund manager makes sense, allowing them to focus on the adviser-client relationship

It is no surprise that the process of outsourcing investment management services has been on the rise, especially since the regulatory changes brought about by the RDR in 2012 and by MiFiD II in January this year. Andrew Bennett, a financial adviser and director of Hartcliff Financial Planning, is a keen supporter of outsourcing to an investment partner.

He says: "I think there's a really strong business case for it from a number of angles. One is that you get a consistent approach and consistent outcomes for clients. If I outsource to a multimanager, for example, my clients get the benefit of having an extremely diverse portfolio.

"It's unconstrained, so we know we are getting the best of the breed, and every fund in the portfolio is there on merit. "But then because of the way the multi-manager manages the risk and rebalances the portfolio to keep it within the client's risk band, we know that the outcomes for the client are based on what they want and on the amount of risk they want to take."

Admin burden

Bennett goes on to say the biggest benefit from outsourcing is the time saved, which instead of being used to research, construct or rebalance a client's portfolio, can be used elsewhere. He says: "[By outsourcing investment management] I can now spend time with clients doing the things that they actually value, which is the face-to-face time and having a proper dialogue. It is all about making sure their investment is ‘on plan' and their goals and aspirations are being met."

Outsourcing also gives a "layer of protection" to the adviser, Bennett says. "This is particularly true if the investment house is transparent and you can see what their process is, how they build their funds, how they make their portfolios within the funds, and how they keep within the risk parameters.

"It means I've got the confidence to be able to sit down with the client and say ‘yes, you've come out as a cautious to moderate investor, which means your portfolio will always match that risk tolerance.'"

Seeking expertise

Serena Van der Meulen, director at Van der Meulen Associates, also fully outsources investment management. She says: "The value of doing this is time. I don't have time to research individual funds. I use two research fund houses and cross-reference the research there on holdings, but then I rely on the managers to pick stocks. The other advantage, of course, is their level of expertise in the field. I am not a fund manager; I'm a financial planner. I wouldn't risk picking stocks."

Bennett believes that the trend of outsourcing will continue due to the recent regulatory changes brought about by MiFID II which has aimed to encourage a different method of engagement between advisers and outsourced investment managers, known as a ‘reliance on others'.

To understand how greater regulatory scrutiny is driving the outsourcing boom click here to read our adviser guide.

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