An overriding principle when looking to outsource is to ensure that you, the adviser business, is in control of the process – the mantra being that you choose the DFM, rather than the DFM choosing you. Key to this is ensuring that you make your central business decisions before starting the selection process.
In order to maintain control of the process, and more importantly the client relationship, these decisions will need to centre on the following key areas:
– Client segmentation – know your clients, and not just in terms of wealth, as this will point at the solutions required.
– Clarify your service proposition. Once you know your clients, and therefore target market, you can start to formulate the service that is required to meet your clients’ needs.
– Agree your approach to charging. This is a case of matching services offered with the fees that you are planning to charge – with a view to offering value for money for clients.
– Analyse your firm’s skills, capabilities and resources. This will indicate what can be done in-house, what needs to be outsourced and what expertise needs to be bought in.
– Decide what responsibilities you want to outsource or retain. This may be dictated by your outsourcing partners, but the fundamental requirement is to ensure that the client relationship remains yours. Most outsourcing partners understand this.
– Decide what support services and systems you will be using. There can be overlaps in technology used (for example, between back office and platforms). Identify where know-ledge and research is light within your business and consider buying in the research you require. Finally, document everything. This is good practice from a regulatory point of view and makes repeating the process in the future that much easier.
Once you are in a position to begin the process of selecting a specific DFM, it is essential that you undertake robust due diligence to ensure that you make appropriate choices.
Matt Ward is wealth management consultant for Defaqto
A survey in November 2012 found that 52 per cent have chosen to outsource some or all of their investment process.
From bespoke, to unitised and managed portfolio services, there are a whole host of solutions in the market.
An overriding principle when looking to outsource is to ensure the adviser business is in control of the process.