Two thirds (66%) of financial advisers questioned by Skandia said they expect to use an outsourced portfolio management service in the next few years, with the average adviser expecting to use these services for nearly half (46%) of their clients. Based on the predicted size of the adviser market at that time this would equate to assets in outsourced portfolio management solutions of £141 billion. This compares to around £52 billion today, an increase of over 170%.
Further research** suggests that the type of outsourced portfolio management services most frequently used by financial advisers are Discretionary Fund Management, multi-manager funds, multi-asset funds and managed portfolio services run by a third party provider.
Nearly 63% of the financial advisers surveyed who outsource their investments, stated that they did so because it allowed them to leverage on expertise outside of their own businesses. This correlates with the 49% of advisers who believe the investment expertise of a third party provider is the most important factor when considering an outsourced solution. A further 54% stated that reducing risk to their business was another key benefit for outsourcing.
Alistair Campbell, head of investment marketing at Skandia, comments:
“With the emphasis very much on improving customer outcomes and managing business risk, constructing bespoke portfolios for every client is no longer an option for many advisers. By using an outsourced investment solution, advisers recognise they can engage the skills of investment experts to help reduce the investment risk and administration burden to their business. This in turn allows them to spend more time on providing long term financial planning to their clients.”
*based on research conducted in November 2013, surveying over 200 financial advisers
**research conducted in March 2014, surveying over 1,000 financial advisers