The platform provider has spied a “latent demand” among advisers for more control over the discretionary funds their clients invest in.
Advisers are either looking to gain these permissions themselves, or looking to set up companies with these permissions.
“We're having conversations with more and more advisers who are looking to investigate getting discretionary permissions,” Graham Folley, an investment specialist at Quilter’s platform, told FTAdviser.
“There's obviously a latent demand out there,” he continued. “We’re also seeing more advisers actually getting their own discretionary permissions. And competing, if you like, because they're looking into the discretionary markets thinking ‘well actually can we do this ourselves?’”
In response to such demand, Quilter has automated parts of its platform in an effort to help advisers more easily manage these funds themselves.
“We feel this is an area that we should support,” said Folley. “If advisers can get permission from the regulator to manage their clients assets on a discretionary basis, we should be supporting it. We should be offering the tech support and functionality that allows them to do that.”
Changes include Quilter taking care of the 10 per cent depreciation reporting rule, which advisers and DFMs have traditionally found difficult to meet due to the mandated timescales, as well as transferring more of the data collection to itself.
“We’re doing the heavy lifting,” said Folley.
The shift towards more advisers choosing to obtain discretionary permissions began with the Retail Distribution Review in 2013, but this was “accelerated” in 2018 by Mifid II, according to Quilter.
The regulation required advisers to segment clients by their needs, alongside enhanced cost and charges reporting, prompting many to tilt towards an in-house centralised investment proposition.
“It's very much a cultural thing,” said Folley. “Some advisers invest a lot of time and effort and money into this. Even to the extent of bringing in ex stockbrokers or ex wealth managers from private banks and other firms.”
The Quilter platform currently harbours a 50/50 split, with the other half of advisers outsourcing discretionary fund management to third parties.
“Some go down that route [of probing for their own permissions] and say, ‘you know what, we're financial planners, we’re much better at being the gatekeeper’,” said Folley.
“If it's their own gear, then they've got to wrestle with conflicts of interest and what happens if it doesn’t perform as they'd like it to.”
The number of discretionary assets on its platform jumped from £2.4bn at the start of the year when it introduced fresh automations, to more than £5bn by September 2021, Folley said.
“We have seen really big AUM shifts in this area, which has drawn money in our direction. Advisers are a lot closer to those investment offerings,” said Folley.
“So, they’re better able to articulate them to customers as to how they behave, what their likely returns will be, and what the risks are going to be in the future.”
Quilter’s platform has gone from being home to 4,000 fund instruments, to around 7,500, with the majority of new fund requests asking for smaller and newer groups in more niche areas.
ruby.hinchliffe@ft.com
