New research by Aegon, published in its latest ‘Adviser Attitudes Report’, shows that a significant number of advisers are outsourcing investment management, with multi-asset funds and model portfolios built using external (DFM) expertise now accounting for over 55 per cent of assets.
The most popular form of outsourcing is use of multi-asset funds, favoured by 29 per cent of those who outsource, while 12 per cent use DFM portfolios – a figure that, while still modest, has grown significantly in recent years. By contrast, the use of single strategy funds is most popular amongst 16 per cent of advisers.
Model portfolio use, split between those who utilise external expertise and in-house, accounts for 32 per cent of all assets placed, down from 36 per cent in 2017 and 41 per cent in 2016. Whilst overall model portfolios remain popular with advisers, in-house model portfolios have declined in popularity with a significant number of advisers choosing to delegate asset allocation and fund selection to specialist investment managers. Research shows that when assessing a fund’s quality, advisers rank robust investment process (22 per cent), investment strategy and ethos (22 per cent) and past performance (21 per cent) as the most important factors.
Nick Dixon, Investment Director at Aegon, says: “We’ve seen a clear increase in advisers’ use of outsourced investment management. This reduces adviser business risk and creates greater capacity for them to focus on client relationships and financial planning. Furthermore advisers’ increasing use of multi-asset funds and decreasing use of model portfolios reflects a trend towards simpler solutions for clients, with lower costs, aligned with the FCA’s increasing focus on value for money.”