Interest from financial advisers in obtaining discretionary permissions appears to be waning, according to a survey.
Nucleus’ latest adviser survey found 1 in 10 advisers planned to hold discretionary permissions in 2018, a stark fall from the 1 in 5 saying so in 2016.
However, the percentage that already hold these permissions has remained constant at 8 per cent.
The data, which was released today (July 31), found discretionary fund managers (DFMs) continue to polarise opinion among Nucleus users, with 22 per cent of those that use them expecting to increase their usage in the next year, and 6 per cent expecting it to decrease.
Over the longer term, 43 per cent of users said they will not use a DFM, about the same number as those planning to work with DFMs, while 14 per cent said they would decrease or stop using their current provider.
Nucleus had surveyed about 200 users earlier this year.
Meanwhile, for Nucleus users, in-house model portfolios continue to gather the largest proportion of client investments.
This year, 45 per cent of all users with in-house model portfolios will allocate more than 80 per cent of client monies into these products, up from 34 per cent in 2017, Nucleus said.
Barry Neilson, chief customer officer at Nucleus, said: "There has been continued rumblings in the market that adviser applications for discretionary permissions was on the up, so it is perhaps surprising to find our users supposedly buck that trend.
"With so many advisers still building their own in-house model portfolios, it is important that they realise the administrative burden this can have if they operate these on an advisory basis.
"While one option could be to outsource these functions to a discretionary investment manager, we can see from the stats that not all advisers are sold on the value add these partners can bring to a business."
He added: "Whether an adviser is using one or has its own permissions, they need to ensure that the necessary due diligence is carried out, and that the operational processes are robust, consistent and provide the customer with the best service and outcomes as possible."
Alex Reynolds, an adviser with Advies Private Clients, said: "Given the regulator's view on what advisers should be doing and how they research this, I am not surprised that advisers are choosing not to have discretionary permissions.
"Technology is making the need for discretionary permissions less of an issue which was often the reason for seeking the permissions in the first place. This may change further of course and there are always some clients that cause problems with not replying to requests but in the main I think that it is more manageable for firms than it was."
aamina.zafar@ft.com
