Investments  

Guide to outsourcing investments

  • Comprehend why there has been a rise in advisers outsourcing investments to a DFM.
  • Understand who owns the client in an outsourced agreement and what can be outsourced by advisers.
  • Learn about the pros and cons of outsourcing investments.
CPD
Approx.60min
Guide to outsourcing investments

Introduction

Joe Public’s perception of ‘outsourcing’ is probably a call centre based somewhere in Poona or Peterborough.

However, for the financial services industry, it is a tried and tested method of getting things done. Companies outsource aspects of their business, such as HR and payroll, accounting and legal, technology and design.

When it comes to investments, many advisory firms now outsource to a third-party provider, such as a discretionary fund manager, or through a platform to a managed portfolio service. 

Since the Retail Distribution Review (RDR) came into effect in UK financial legislation, advisers have been attempting to cut costs, improve compliance, remove the need to manage the investment portfolios themselves and step back from managing client assets. 

Instead, many advisers are now seeking to outsource investment decisions so they can focus instead on long-term financial planning, client reviews and building the business – things which time would not allow if they were continually managing client money.

But while this seems like a great solution, there are drawbacks, which this guide will explore, not least the complicated questions of who owns the client or whether all clients will end up treated as a homogenized entity by the third party.

This guide will explore the reasons behind the rise of outsourced models, ascertain who owns the client in the eyes of the FCA, what sort of business should be outsourced – and why – and provide a checklist for advisers considering outsourcing part or all of their investment business.

Contributors to this guide: Rohit Narang, chief operating officer for Intelenet Global Services; Mickey Morrissey, head of distribution for Smith & Williamson; Lawrence Cook, business development director at Thesis Asset Management; Emily Booth, senior investment manager for Parmenion Investment Management; Peter Mullins, head of business development at European Wealth; the Financial Conduct Authority.

simoney.kyriakou@ft.com

In this guide

CPD
Approx.60min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to Mr Narang, what is the most pressing factor for advisers choosing to outsource to a discretionary fund manager?

  2. What does Ms Booth say about the regulatory burden faced by advisers today?

  3. Mr Mullins says as far as the DFM is concerned it is responsible for three of the following for the portfolio they are managing. Which of these is it not responsible for?

  4. Mr Morrissey says with advisory firms segmenting their client banks, intermediaries are using an MPS for what type of clients?

  5. Which one of these is not a question on the adviser's checklist for outsourcing?

  6. According to Mr Morrissey, what type of advisers will be able to grow and enhance their business?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Comprehend why there has been a rise in advisers outsourcing investments to a DFM.
  • Understand who owns the client in an outsourced agreement and what can be outsourced by advisers.
  • Learn about the pros and cons of outsourcing investments.

I completed this CPD in

To bank your CPD please complete the form below.

Were the stated learning objectives met?

Why weren't they met?

What did you learn from undertaking this CPD exercise?

Why did you undertake this piece of learning?

Any comments about this article or FTAdviser's CPD in general?

Banked!

Congratulations, you have successfully completed and banked this piece of CPD

Already Banked!

You have already banked for this article.

To bank your CPD you must or

Register

One or more questions have been incorrectly answered,
 please review your answers and try again.

Please complete all the above text fields to bank your CPD.

More Investments CPDSee my completed CPDSee all CPD