RDR has ‘dramatically impacted’ multi-asset market

RDR has ‘dramatically impacted’ multi-asset market

The Retail Distribution Review has dramatically impacted the multi-asset market, with most advisers now offering such funds at the heart of their own centralised investment propositions, experts told FTAdviser.

Speaking to FTAdviser, Zurich’s head of retail platform strategy Alistair Wilson, said that the RDR forced advisers to deliver different and new services to their clients once they were segmented.

“Having more client service models within firms has led to an increased number of advisers using multi-asset funds as part of their solutions.

Article continues after advert

“Some advisers have moved away from fund selection, passing on the responsibility for the day to day management of the fund to the fund manager. The manager takes responsibility for re-balancing the assets, which can reduce the capital gains tax payable on unwrapped assets.”

Mr Wilson added that the advantage for the adviser was that it reduced their own business risk associated with managing client assets and the overall administration of managing the funds.

Cedric Bucher, head of UK funds at Architas, part of Axa Wealth, said he has seen strong growth in the fund of fund and multi-asset sectors over recent years, going from £15bn to £93bn over the last decade and that all the signs suggest this is likely to continue.

Research by Zurich revealed confirmed that almost 20 per cent of assets are moving into these funds every quarter.

Mr Bucher agreed with Mr Wilson’s sentiments that the RDR had impacted the shape of the multi-asset market, stating that almost all adviser businesses have now developed their own centralised investment propositions, with either multi-asset or fund-of-fund offerings at their core.

“With the growth of the market, many asset managers have now entered the market. As a result the largest player has less than 10 per cent of the market. Our research suggests there are now over 100 asset managers offering multi-asset or fund of fund solutions.

“Of these there are more than 100 funds that have less than £10m in assets and more than 300 that have less than £50m in assets, which is the usual level below which funds are not deemed profitable.”

Mr Bucher said that this was not a good state of affairs for asset managers because they need to make a profit, while for investors it will lead to higher charges for some.

“As a result, we do expect some consolidation in the market. At Architas we have completed smaller acquisitions in the past and would certainly consider other deals in the future.”

Helen Pridham, editor of the Pridham Report, which monitors fund sales and asset trends in the UK, agreed that multi-asset was trending.

She said that advisers have to make sure the type of product they offer is appropriate to the client’s level of risk, which is why a lot of groups have come out with quite sophisticated funds.

“I think one of the reasons it is being thought of as the area that will do particularly well in the coming year is as a result of pension reforms.