A third of advisers are still doing investment in-house because of concerns about cost, according to research and due diligence consultancy Diminimis.
The research also found a high proportion of advisers rely on personal contacts when choosing a discretionary investment manager. But it found that 34 per cent of advisers do everything in-house compared to 39 per cent six months ago.
The main barrier to outsourcing would appear to be the cost to clients, with 47 per cent of advisers citing this as a concern.
David Gurr founding director of Diminimis comments said: “When looking at the cost of providing an investment solution, when cost is the main barrier advisers need to consider what they are comparing it against.
“Is it simply the difference between the cost of the product and the service? If so, at what stage does the cost become competitive?
“Robo DIMs offer integrated systems including personality profiling, attitude to risk analysis and take full client investment suitability on board, leaving the adviser free to concentrate on the financial planning and the client relationship management. There is no issue of shoehorning and entry levels can be modest.
“In this instance, technology aspect really does address the age old conundrum when comparing cost against value, achieving much more value for a very similar cost.”
The Diminimis research also found a potential overreliance on external research tools and one in five never review their existing relationships.
One in three advisers (28 per cent) rely on recommendation or personal contacts to select and review a DIM, four in ten (44 per cent) rely on external research tools and one in five (20 per cent) create their own questionnaire.
Meanwhile one in five (17 per cent) say they never review their existing DIM relationships, with six in ten (59 per cent) reviewing this annually, one in five (19 per cent) every six months and just over one in 20 (6 per cent) every three years.
Adviser view
Jason Witcombe, director of London-based Evolve Financial Planning, said: “We don’t outsource but it depends on what stories advisers tell because obviously we don’t run our own funds.
“I am perfectly happy doing it the way we do it and I don’t see any need to outsource to a DFM because I am not convinced it makes life easier or safer for the adviser or better for the client.
“I actually think it probably gives a pretty grey area for who is responsible for the client and who isn’t, which is dangerous.”
