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Financial advisers are looking for more than just value for money

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Financial advisers say third-party investment managers need to do more to deliver on cost, transparency and value for money, according to recent research published by Liontrust.

The survey of 100 UK-based advisers, conducted by CoreData for Liontrust evaluated the success of investment partnerships for advisers and found that 41 per cent of financial advisers say they pay too much for the returns generated by their investment partners.

 
Yet, the report also found that excellent administration (60 per cent), superior service (50 per cent) and quality reporting levels (42 per cent) are also important.
 
Says John Husselbee (pictured), head of multi-asset at Liontrust: “Alongside the increasing trend towards outsourcing investment, so the need has developed for suitability, transparency, an experienced team and consistency of investment process and style. These are vital for a good relationship between investment partners and advisers. The demand for cost efficiency is clear, but equally the report highlights that there is a willingness to pay more if the delivery of those services is good.”
 
The research found that nine in 10 advisers are willing to pay more for consistent performance from their investment partners, while three-quarters (74 per cent) will pay more for strong service levels beyond performance.
 
The research also found that while 91 per cent say they are comfortable working with an investment
partner with an asset management arm, this falls to only 53 per cent for those with an advice arm.
 
According to Husselbee, this finding highlights the stark contrast between those advisers who are happy to use an investment partner with a full advice service and those advisers who are happier using an investment partner with a full asset management arm. The research found that a quarter of advisers are worried about third-party investment managers poaching their clients.
 
“Unlike wealth managers, asset managers tend not to have direct client contact,” he explains. “However, with the increasing use of digital or robo-advice, perhaps asset managers will get involved with clients at some point in the future. Asset managers are better off partnering with investment advisers in those sorts of services,” he adds.
 
In terms of segmentation, advisers have a clear preference for segmenting their client base by wealth/investable assets (76 per cent) in terms of what services are offered, while just over a third divide their client base according to specialist needs and only one in eight do so via age. “Whichever way they segment their client base, investment partners have to make sure that they are offering the services that meet the objectives, risk profiles and time horizons of their clients,” comments Husselbee.
 
The research also highlights the importance of a trusted partner. Says Husselbee: “It is clear that good services and a good service are not the same thing. There are people that offer services and characteristics of a good service, but they don’t necessarily deliver it in a consistent manner and to a level that advisers are happy with.”
 
Investment partners need to offer first class administration, service and performance in line with expectations. Essentially, with trust comes transparency and the partners that are most attractive are the ones that are in regular contact with them.”

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