‘Insourcing’ firm gives in to ‘outsourcing’ demand

Assetfirst, which launched a research service that was designed to help advisers ‘insource’ and build their own range of risk-rated model portfolios, has launched an ‘outsourced’ range of portfolios managed by discretionary manager Fundamental Asset management.

Launched in 2011 by Andrew Whitely and Philip Bailey of advice firm Provisio Wealth Management and Steve Williams of investment consultancy Cormorant Capital Strategies, Assetfirst sought to overturn “conventional wisdom” that investment management is best outsourced to external managers.

It focuses on exchange-traded funds and index fund investing to control costs while giving advisers risk-graded asset-allocation models they can managed directly. Fees initially started at £500 per month + VAT for firms with up to three registered individuals.

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At the time of the launch, Mr Whitely told FTAdviser sister Investment Adviser he did not “see the rationale behind giving business to discretionary fund management services”, saying that advisers “using DFMs could lose their clients to fund groups”.

He said: “Outsourcing investment management to DFMs and the like adds another layer of cost that has to be justified to the client.”

However, Mr Whitely said that following demand from clients, it has partnered with Fundamental to launch a discretionary version of its model portfolio research service, claiming to charge among the lowest overall fees currently available to advisers.

He told FTAdviser that while the firm still sees the research service as “a very profitable proposition”, some advisers do not want to “sit in that position” of running their own centralised investment proposition and are “happy with a investment proposition that will run itself”.

Mr Whitely said: “More forward thinking IFAs like our research service but there are a number of difficulties concerning IFAs... they need to outsource for a back office system, compliance as well as meeting cap ad requirements.

“Whilst we still firmly believe that the existing fee-based service is the most cost effective way for IFAs to access the intellectual property behind the Assetfirst portfolios, we are regularly asked whether we can provide the service on a discretionary basis via the model portfolio functionality offered by most platforms.

“With a management fee of just 0.5 per cent plus VAT and an average model portfolio TER of just 30bps we believe our overall fees are very competitive. That, coupled with a near six-year track record of sector outperformance, makes this a compelling investment solution for IFAs seeking a low-cost, risk-targeted, centralised investment proposition.”

Chris Boxall, joint chief executive of Fundamental Asset Management, added: “The simplicity of the solution belies the depth of research behind the construction and on-going management of the portfolios and we are certain that this combined with the low TER will lead to continued sector outperformance in the future.”