Expert: James Lewis, UK Chief Investment Officer, Mercer Global Investments Facilitator: Don Wild, Wild Ochre Consulting
Headlines:
- Investment committee models - Firms have different approaches - some fully outsource to third parties like Mercer or WTW, others handle in-house via an internal investment committee. Hybrid models also exist.
- Outsourcing pros and cons - Outsourcing can provide benefits like institutional pricing and expertise, but some advisers still prefer control in-house. Transitioning clients also poses challenges.
- Centralised vs independent models - Many see a move towards more centralised, restricted models for efficiency and regulations. But some advisers still highly value independence.
- Adviser productivity challenges - Big focus on improving adviser efficiency and productivity, but changing habits and technology is difficult. Client relationships are critical.
- MPS vs multi-asset funds - MPS are seen by some clients as more bespoke, but others question the value over funds. Tax benefits make multi-assets more popular.
- Scrutiny of value chain costs - Consumer Duty and focus on value is scrutinising all advice charges and costs. Clarity is needed on outsourcing definitions.
Discussion:
The conversation covered various topics related to investment solutions and outsourcing. The key points discussed were:
There are different models for investment solutions - some firms have in-house investment committees and fund selection; others fully outsource to third parties like Mercer or WTW. There are also hybrid models.
Outsourcing can provide benefits like institutional-level pricing and expertise, but some advisers prefer to keep control in-house. There are also challenges in moving existing clients to new centralised propositions.
Many see a trend towards more restricted / centralised models in order to have investment margin for business sustainability and meet regulatory requirements like Consumer Duty. However, some advisers still highly value independence.
Productivity and efficiency for advisers is a big focus, though changing adviser habits and technology can be difficult. The human relationships and cashflow planning piece are critical and hard to scale up.
MPS is seen by some clients as more bespoke than multi-asset funds, but others question the value over just using a fund. Tax advantages in GIAs make multi-asset popular currently.
The Consumer Duty and focus on value for money is increasingly scrutinising adviser fees and the entire value chain cost for clients. Greater transparency and clarity around outsourcing definitions is also needed.
Key takeaways:
- Research further the most efficient models for centralising investment solutions while retaining customisation and adviser relationships
- Look for ways to leverage scale to get institutional pricing for clients while keeping advisers involved in fund selection
- Consider approaches to improve adviser productivity through holistic planning systems and transition support for new processes
- Evaluate your value chain costs in detail in preparation for increased regulatory scrutiny and the need to demonstrate value
- Ensure your outsourcing agreements and terminology are clear and in line with regulatory definitions
