Multi-asset  

Advisers express frustration at unclear CIPs industry

Advisers express frustration at unclear CIPs industry

The centralised investment proposition industry is being stifled by a lack of available, consistent and comparable data, a joint report by the CWC Research and The Lang Cat has revealed.

Speaking at the launch event of the report, Never Mind The Quality: Feel The Width, Mark Polson, principal at the Lang Cat, said that a dearth of information has prevented advisers from carrying out ‘top-down’ due diligence for different DFMs or multi-manager options.

“The quality of the work that is being put in by the industry as a whole to allow firms to understand what is really going on is lamentable,” Mr Polson said. “The worst at the moment are discretionary managers, and that is because they haven’t been forced to do it.”

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During summer 2014, in addition to consulting with the FCA, the CWC Research team interviewed 45 industry professionals: 38 IFAs, one restricted adviser, four advisory asset managers and two independent paraplanners.

The report found that the combination of an increased focus on risk and due diligence, along with RDR margin pressures, appeared to be driving the trend of greater use of outsourcing for asset allocation and fund manager selection.

According to the report, there has been a big shift away from advisers making asset allocation decisions – which only 10 per cent still do. By comparison, in 2008, 10 per cent outsourced while 90 per cent made asset allocation decisions.

The most common criteria for external fund manager selection were past performance, methodology, reputation and cost.

Saying he understood why some DFMs do not want to disclose their latest figures, Mr Polson added: “However, there are ways of being open but allowing information to lag so that people are not getting the most up-to-date impression.”

Key figures

Average proportion of assets under influence held in multi-manager funds: 27.5%

Average proportion of AUI held in DFMs (not in an Oeic wrapper): 17.5%

Nearly half of respondents recommended MM solutions for smaller portfolios

Cost, performance and methodology were the three most common criteria for selecting a MM fund.

Schroders was the most common first choice of MM provider, followed by Vanguard and 7IM.

Adviser view

Richard Allum, founder of Oxfordshire-based The Paraplanners, said: “I agree with this report. It is a constant source of frustration trying to get to the bottom of what the total costs are. We would like to know all the details of the charges so that we can present accurate comparisons to clients.”