Following the introduction of RDR, the majority of financial advisers will outsource client portfolios to a discretionary fund manager (DFM), according to a study by Investec Wealth & Investment (IW&I).
Just under half (47 per cent) of advisers currently use DFMs but the research shows that an additional 10 per cent of financial advisers who have yet to outsource client portfolios plan to start doing so following RDR.
The most popular reasons for the change of approach among advisers who have not used DFMs to date is so they can delegate the day-to-day investment management process (89 per cent), gain access to an investment professional (82 per cent), and reduce their growing administrative burden (73 per cent).
According to the research from IW&I, the most important criteria cited by advisers when choosing a DFM for the first time are quality of service; the ability to develop a trusting, personal relationship; cost; transparency of charges; and investment performance.
As well as the growth in using DFMs, a third (34 per cent) of advisers also plans to increase the number of client portfolios held on platforms. Currently, financial advisers outsource 11 per cent of the client investments to DFMs via a platform and the average number of platforms used is three.
The research also found that one in five (20 per cent) financial advisers who already use DFMs say they will be increasing the number of client portfolios outsourced due to RDR.
Mark Stevens, head of intermediary services, Investec Wealth & Investment, says: “The research shows that RDR has been a tipping point in the use of DFMs among advisers as the challenges of operating successfully in a new environment bring the benefits into sharp relief. Outsourcing to a DFM for bespoke investment management will soon be an approach adopted by the majority of advisers.
“We have provided bespoke investment management services to advisers for over 20 years and over this time have developed a strong understanding of what makes a successful partnership. As our research shows, advisers are looking for quality service, a trusted relationship and a transparent charging structure that demonstrates clear value.”
