Unitised discretionary portfolios give boost to advisory market

The introduction of unitised portfolios by discretionary firms, as they re-evaluate their approach to the retail market, has increased consumer access to investment management, says Defaqto, a London-based financial research company.

The growth of unitised portfolios by discretionary firms will in turn boost opportunities for advisers to meet their clients’ investments needs and expand their business offering.

Defaqto’s most recent research among platform users, completed this month, reveals that 42% of advisers outsource some or all of the investment process. Of those surveyed, more than 20% stated that they have outsourced to a discretionary manager.

In its newly published guide to unitised discretionary management services, Defaqto highlights how discretionary firms have realised that the adviser market has significant potential, in terms of the volume of client assets under management and, as a result, they have become much more proactive in competing for it.

Broker desks and broker sales teams are now the norm for those firms competing seriously in this market, and many of the new services launched are aimed directly at the intermediary market and their clients.

Solutions put forward by discretionary firms in recent years have been designed more to deal with the advisory market than wealthier private clients. Collectives run by the discretionary managers, once included with the intention of being the building blocks of more bespoke portfolios, are now beginning to be marketed in their own right, with the aim of making discretionary portfolio management available to a wider number of clients. Clients with as little to invest as perhaps £1,000 can access the management style and techniques of the discretionary firms.

However, when outsourcing through this channel advisers must be confident of staying with their selected discretionary manager for some time and, as such, undertaking thorough due diligence is crucial.

There are a number of key areas that advisers should investigate to ensure they select an appropriate partner:

– The discretionary firm’s reputation, financial stability and resource

– The investment solutions offered

– The fund manager’s investment process and philosophy

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