Brewin Dolphin has questioned why a rival is arguing advisers should reconsider doing business with them in light of their decision to withdraw bespoke investment services for direct clients with less than £150,000 to invest.
Wellian Investment Solutions, the discretionary multi-manager arm of Harwood Capital Group, has urged advisers to reconsider the benefits of outsourcing with model portfolios in light of Brewin Dolphin’s decision to withdraw bespoke investment services for clients with less than £150,000 to invest.
Clients affected by the change at Brewin Dolphin have been given a 30-day notice period, after which they will be automatically moved across to the execution-only service.
Brewin stated that the cost of managing these portfolios is becoming uneconomic and the move follows the launch of its D2C BrewinsDirect proposition, which itself comes after the sale of Stocktrade to Alliance Trust in May.
However Gareth Johnson, Brewin Dolphin’s head of managed investment services, responded that the change has not impacted the clients of advisers. “They are served under an agency agreement and, as such, are not the clients of Brewin Dolphin, but the clients of the adviser firm.
“It is therefore, up to the adviser to determine the relevant service for their clients’ needs and Brewin Dolphin will undertake the investment management.”
Chris Mayo, investment director at Wellian, commented that as well as the cost savings made by selecting a model portfolio via a DFM, advisers also retain a greater element of control over the client relationship, whereas this is lost in a bespoke service that requires direct contact between manager and client.
“Loss of control is and always has been the number one concern for advisers when it comes to outsourcing. However, selecting a model portfolio actually allows the adviser to retain control by giving them more time to focus on the most high value area of their business; maintaining client relationships.”
He added that compliance also becomes less of a worry, because the uniformity and consistency applied to the investment and risk management processes across all portfolios is supported by the regulator.
“We urge those who are unsure of their options at this time to consider whether or not their client portfolios might be better serviced with a cost effective model solution rather than simply defaulting to a more expensive execution only service.”
Phil Billingham, compliance and operations director at Perceptive Planning, told FTAdviser that this was a classic bit of opportunistic public relations work.
“I have seen no evidence that DFMs actually add value over and above their costs, but I’m a cynic,” he added.
Whilst on the subject of opportunistic PR, online discretionary manager Nutmeg has offered “dumped” Brewin clients three months of free service and a box of chocolates.
Nick Hungerford, chief executive at Nutmeg, told FTAdviser that as the firm is technology-driven, it can offer the same service levels, but without the need for any limits on investable assets.
He added that it should also have a big enough “war chest” to be able to follow through on the chocolate offer.
David Gurr, founding partner at DFM due diligence firm Diminimis, suggested that advisers look more carefully at the terms of agreements made with those that manage client assets, adding that Brewin’s move was “indicative” of how larger firms will treat clients.
“Brewin must have done this from a commercial perspective, but perhaps they did not make sufficient consideration of advisers. I think there’s possible reputational risk for them here.”
Mel Kenny, chartered financial planner at Radcliffe and Newlands, meanwhile stated that even with cost put to one side, Brewin’s move was no surprise. “A bespoke proposition to all people doesn’t sound very bespoke.”
Graeme Mitchell, managing director at Lowland Financial, said it represents the upper end of the dilemma facing financial services – delivery of advice and products to the mass market.
“I appreciate stock brokers are not mass market, but when they reject decent size portfolios it must reflect cost of business and compliance, which is likely to filter down the line to advice.
“We have tried hard never to reject anyone on the basis of size of assets – but as we do have minimum fee, so it’s up to the client to decide if the fee is justified.”
peter.walker@ft.com
