A Guide to Outsourced Investment Solutions

by Fraser Donaldson
Insight Analyst - Wealth Management

September 2013

Following the service proposition reviews necessitated by the Retail Distribution Review, many firms now face a decision on whether to outsource their investment process. This guide will help advisers identify the options available and decide which solution is best suited to the needs of their business and clients.

The demands posed by the Retail Distribution Review have required many adviser firms to review their service proposition to ensure their offerings are suitable, fit for purpose and offer value for money to clients.

In preparing these revised propositions, advisers will almost certainly have undergone a process of detailed client segmentation and profiling to establish what investment propositions would be most suitable for particular clients. Firms will then have looked at their own resources to establish whether all indicated propositions can be provided internally.

Having considered all the above, many firms are now in a position to decide whether or not it is necessary to outsource some or all of the investment process to a dedicated third party.

Bearing in mind the significant amount of time many advisory businesses will no doubt have spent on this self-examination process, it is essential that advisers avoid making snap decisions that could potentially undermine all their hard work. Rather, any decision on whether or not to outsource should be based on sound and quantifiable rationale. Specifically this decision should be based on three primary elements:

• Whether outsourcing will deliver the best outcome for the client
• Whether the resource available in-house is sufficient to meet requirements
• Strategic considerations (e.g how to achieve consistency of advice being delivered to clients, outsourcing to de-risk the advisory business, cost implications, etc)

In addition advisers who do choose to outsource will need to consider whether to opt for a multi-manager or discretionary approach, or indeed whether utilising both is an option.

Our new guide to outsourced investment solutions will help financial advisers identify the various options available to them and to decide which is the most appropriate for their clients.

Content includes:

• Analysis of the three elements of consideration that drive the decision to outsource, including specific factors that advisers will need to take into account
• Taxonomy of outsourced investment solutions, with detailed analysis of the various solutions available and their potential benefits
• Explanation of the distinctions between the two primary categories of managed solutions:  risk targeted and returned focused
• Guidance on due diligence that should be undertaken by advisers when choosing an outsourced solution