Most advice firms use a centralised investment proposition, according to the Lang Cat. Nine in 10 (88 per cent) run a CIP, the consultancy’s research shows, with four in 10 (38 per cent) outsourcing.
The figures therefore show that outsourcing is no longer a rarity in our industry.
Nevertheless, longstanding firms that already outsource should review their CIP annually to ensure that their current partner is still fit for purpose, says Tracey Atkin, business development manager at IBoss.
Atkin notes considerable growth of the model portfolio service market over the past few years, with market share becoming more competitive. Indeed, several hundred new model portfolios were reported to Morningstar between 2018 and 2020, reflecting rapid growth in the sector, the research provider notes.
Besides the customary reviews of risk, return and administration, Craig Wright, managing partner and head of UK IFA services at Evelyn Partners, says that depth of resources is sometimes overlooked.
“I would recommend beefing up selection to include financial strength of the firm. The truth is that sometimes things happen out of your control and you want to be confident the manager has the people and financial depth to resolve issues.
“In addition, the size of the MPS team and what their day-to-day responsibilities are should be understood. Inevitably managers will have other tasks such as attending committees, report writing and team management responsibilities.
"What depth is there to the team and what are the investment manager’s non-MPS responsibilities, are key to understand.
“What you are trying to ascertain is how much of their time is dedicated to managing the money, what other back-up there is and an understanding of their non-MPS commitments. It’s equally important to meet the team as well as the manager.”
Atkin agrees that meeting the team is a factor to consider. “Organise a call with their investment team, and always meet the managers who are making the decisions. If you can, meet them in person, visit their offices and meet the wider team you could potentially be working with.
“Have as many meetings with the decision-makers as need be, don't be afraid to ask to meet again and again, as many times as you feel is necessary to ensure you are comfortable with how they are managing money.”
Investment performance is another factor, says Atkin, who suggests requesting a licence to research a potential partner’s performance data. “We would suggest you don't use this in isolation.
“Always consider the outputs alongside any upcoming investment team meetings you have, and remember the research tools are not always comparing apples with apples. Performance data should always be considered once you fully understand a provider’s investment philosophy.”