Your IndustryDec 13 2012

Debate: Does outsourcing undermine an IFA’s business?

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      As an independent financial adviser, it is important to us to offer a range of potential solutions that are designed to meet the needs for all our clients. For us it seems a natural progression that our client proposition should offer access to bespoke professional fund management where it is appropriate to the client circumstances.

      A good example of where outsourcing investment management really comes into its own is when we are advising “lay trustees”, who perhaps do not have the required expertise and experience to manage the trust assets efficiently and meet the requirements of the Trustee Act 2000.

      If you are deferring to someone else you potentially undermine your own position; sacking the gatekeeper might be a lot simpler than sacking the DFM

      Many of our introducers who have trustee clients express high degrees of satisfaction where it can be clearly shown that the trust funds are being managed competently and meet the income and capital requirements of the beneficiaries.

      More specifically, it is common knowledge that Trustees are expected to adhere and follow what the legilsation calls “standard investment criteria” (section 4, TA 2000). Specifically, S3(b) requires trustees to have a regard “to the need for diversification of the investments of the trust, in so far as it is appropriate to the circumstances of the trust”.

      Clearly, there will be certain situations where outsourcing the management of the trust assets would be inappropriate, but in many cases - particularly where a trust is expected to remain in place for some considerable amount of time and the requirements of the beneficiaries are complex - then in order for the trustees to meet their duty of care and fulfil the requirements of the TA 2000, a professional and well managed outsourced investment solution can be invaluable. From our perspective it also enhances our service proposition to clients and introducers.

      From a wider perspective we are conscious that a large number of our clients have significant investable assets with a wide diversity of financial aspirations. It is incumbent upon us to put in to place suitable financial planning and investment solutions subject to the appropriate due diligence any client would expect.

      More formally outsourcing allows us to adopt a formal approach to the way our clients’ assets are managed and to have in place a formal review process and audit trail. In short from a compliance perspective our investment proposition is robust and repeatable.

      Rebuttal: Dennis Hall

      Ignoring all the sections and sub-sections for a moment, what attracted my attention was the suggestion that an investment process that is not outsourced is somehow an informal process.

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