Outsourced investments and fees: advisers can square the circle

‘Advisers shun DFMS to justify fees’ is the headline in a recent Portfolio Adviser article. The article, based on a survey by Rathbones, highlights that a fifth of advisers would never consider outsourcing investment management because of the impact it could have on their own fees.

It seems to me that many advisers feel they are stuck between a rock and a hard place, thinking that partnering with a DFM would force them to cut their fees or explain to clients why the cost of their overall service has to increase.

Value of a DFM

Outsourcing to a traditional DFM certainly adds extra costs plus it can dilute the direct relationship advisers have with their clients.

The upside is that it can result in better investment outcomes for clients and it enables advisers who are not highly qualified in investment management to demonstrate to the regulator that are working in the best interests of their clients.

Off the shelf solutions

Choosing to manage investment in-house also has pros and cons. The availability of risk profiling tools and model portfolios that can be bought off the shelf and hosted on a platform seems to offer a solution for advisers who want to stay central to the investment management process.

However, this route comes with its own risks and there are too many of them for me to detail them all here. Shoe-horning, agent as client, mis-matched risk profiling tools with risk rated model portfolios are just some of the dangers that advisers need to be aware of when choosing this option.

Best of both worlds

So, what’s the solution? The PortfolioMetrix team understands the quandary that many advisers face when it comes to investment management. This is why we developed a proposition that gives advisers the best of both worlds: award winning expert investment management services with an undiluted client relationship.

There is a price but it’s far less than a traditional DFM would charge and, because it’s always the adviser who meets with the client and not the PortfolioMetrix team, clients can easily see the value they are getting from the enhanced service they receive.

If you’d like to know more please do get in touch with me or one of the team. You can find our details on our website.