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Home > Investments > Discretionary Management

By Aimee Steen | Published Aug 06, 2012

IFAs could shun outsourced portfolios after RDR, DFM says

Financial advisers are expected to shun discretionary model portfolios and return to their own models post-RDR, says one discretionary fund manager.

Robert Thorpe, head of UK retail at Cazenove Capital Management, said the perceived trend towards DFM porfolios may not actually come to pass.

“There are too many IFA firms that completely outsource everything,” he said, adding that this is often done in ‘segments’ to meet different needs.

While he championed discretionary management for higher-end clients, he argued that the ‘middle ground’ between a full discretionary service and funds of funds touted by other DFMs – referring to model portfolios set up by discretionary management firms – are little more than non-unitised multi-manager funds.

Thorpe said if advisers instead chose to keep such clients in-house, they could use it as an opportunity to add value.

“Advisers are having to justify their ongoing fee,” he said. “If that involvement helps justify it, that’s good.”

Thorpe said for many discretionary model portfolios, all advisers would be doing is paying an extra 25-40 basis points for running it and having more of a hands-off relationship with the client as a result.

Andrew Morris, managing director of the Signature portfolio management, disagreed, saying there is a strong trend towards outsourcing investments.

“I think IFAs are increasingly looking to walk away from the fund selection part of things,” he said.

The ‘old school’ model may support the idea of adding value whilst selling investments, he said, but advisers today are looking to bring in external expertise for their clients.

“There is a segmentation of responsibility,” Morris said, adding the additional regulatory burden around ensuring suitability would continue to drive outsourcing.

“There is much more choice than there has been as momentum has gathered,” he said. “All that suggests, by value and by volume, there will be a lot more outsourcing.”


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