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Is the adviser outsourcing boom about to turn to bust?
by Danielle Levy on Sep 11, 2013 at 12:16
The adviser outsourcing market has taken off in the past few years, accompanied by an explosion of competing services.
However, now adviser firms have survived the introduction of the retail distribution review (RDR), some are tipping a slowdown or even a reversal of the adviser outsourcing trend.
Advisers say this is being driven by a realisation of the fiduciary responsibilities and ongoing due diligence that accompanies the decision to outsource to a discretionary manager; concerns about losing control of the client relationship; and advisers’ desire to show value to the client to justify fees.
Sam Liddle (pictured) of consultancy Albemarle Street Partners does not view it as a wholesale shift away from outsourcing, but says his firm is picking up mandates to help advisers bring investment back in-house.
The firm, which launched just over a year ago, advises on £2.5 billion in assets and helps advisers with the transition stage. This includes building and overseeing an investment process while a firm applies for discretionary permissions, and may include hiring an investment team.
He says this is a move some advisers feel is worth taking despite the associated extra regulatory and cost burdens. Yet the bulk of Albemarle’s work has focused on building model portfolio solutions and sitting on newly created investment committees.
‘There are a few firms we have found where they may have been outsourcing for two to three years and are feeling they are not necessarily gaining a lot of value from that. It may be that the business as a whole could benefit from having direct control of the assets and improving the uniqueness of its offering to clients. This is important to a lot of advisers at a time when everything appears so standardised, so they feel they are adding value to that client relationship,’ Liddle said.
Two main factors he cites are a fear of standardisation and the growth of mega funds due to crossover in buy lists.
Tim Hale, managing director of Albion Strategic Consulting and founder of Mode FP, says it is more a case of two-way traffic.
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