The days of small IFA firms doing their own fund management will disappear, according to Beaufort Investments’ chief investment officer.
Speaking to FTAdviser, Beaufort’s Stephen Watson said: “It’s too much of a job to do all the advice, alongside the technical work and the fund management as well; you can’t do it part-time.”
He suggested advisers who just opt for five-star rated funds or Woodford funds still need to understand what they are buying.
“I think it will be increasingly difficult for firms to manage funds,” Mr Watson said, adding the burden of regulation is unlikely to get lighter.
Since the Retail Distribution Review, there has been a pattern of consolidation within the financial advice industry, as firms have sought greater scale to cope with the shifts in regulatory demand.
Standard Life 1825 business recently took over Munro Partnership and Almary Green.
Mr Watson said even firms that were “fiercely independent” have been taken over by bigger restricted businesses.
This is supported by research from consultancy Harrison Spence which found more than 20 per cent of independent financial advisers planned to move to restricted status in 2016.
Mr Watson also revealed Beaufort’s plan to buy other companies as it aims to bring its assets under management to £1.5bn in three years from the current £500m.
He said five firms are currently being looked at as potential partners.
“It’s a process of finding firms that are reasonably substantial in assets, have good flows of new business, and think like us.”
Dan Brocklehurst, managing partner at Cheshire-based Trusted Planning, said: “There are easier options for the IFA than managing funds in-house but that doesn’t mean it can’t be done successfully.
“It is possible for small firms to offer competitive in-house investment propositions and also recommend external investment services where it’s in the clients’ best interest.
“The (truly impartial) IFA also fulfils the important role of reviewing how the overall investment proposition is stacking up against alternatives on an ongoing basis, and be in a position to recommend and implement changes from an impartial perspective.”
katherine.denham@ft.com
