RDR to raise role of due diligence for multi-managers
Outsourcing clients’ investment portfolios is likely to increase among multi-managers in the run up to the Retail Distribution Review (RDR) and this will increase the need for robust due diligence, according to research by independent financial research company Defaqto.
The research found that 23% of platform users outsourced to a multi-manager in 2010. With the volume of assets invested in multi-manager funds rising by almost 600% in the last decade – from around £11bn in 2001 to about £63.5bn this year – multi-manager funds will continue to be an important outsourcing route for advisers in the run up to 2013 and beyond.
The RDR will come into effect on 31 December 2012 and will apply to all advisers in the retail investment market, regardless of the type of firm they work for, whether banks, product providers, independent financial advisers, wealth managers or stockbrokers.
“In the lead up to RDR implementation, multi-managers will be looking to ensure that their propositions meet the needs of advisers and clients. By the same token, advisers are likely to be thinking about how they will deal with clients’ investment portfolios under the RDR, with outsourcing being a key priority for many,” said Fraser Donaldson, Defaqto’s insight analyst for funds.
According to Defaqto’s “Guide to multi-managers”, the outsourcing route presents a number of opportunities for advisers. It will free internal resources to develop client relationships and new revenue streams, facilitate access to historical data on fund managers’ performances, and give the ability to control some aspects of the investment process, such as asset allocation.
The guide aims to give advisers the information they need to fully understand the multi-manager sector and make selection decisions that will benefit themselves and their clients.
“There is now a real choice of approach for advisers wishing to outsource their investment management, and in many respects the multi-manager approach is complementary to discretionary management and certainly an option that needs consideration,” said Donaldson.