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Editor’s note: Addressing advice and investment overlap

How much should advisers get involved in a client’s investment planning? It is a divisive issue, and one that has become more complex as the profession becomes ever more adept at devising intricate centralised investment propositions and model portfolios for itself.

Play advocates of this approach against proponents of outsourcing to discretionary managers and life planning evangelists and you will rarely hit on a middle ground.

Some will maintain that investment professionals will always outperform IFA fund choices net of costs. Others are resolute in their belief that there is nothing inherently special about a DFM’s wisdom or ability, and advisers are perfectly well equipped to manage investments themselves without the added cost and time lag.

It is also a debate which doesn’t have a ready-made solution. Evidence can be marshalled in either direction, so the safest bet is most likely to stay agnostic. How investments are run is, frankly, irrelevant, as long as the client knows what they are paying for them, and the costs or risks do not exceed acceptable thresholds. In an era where there is a laser focus on performnce, and therefore value for money, whatever approach a financial adviser uses, it is going to have to be justified in detail.

Cover feature: When does advice end and investment management start?

But the point is the advice profession does not have to choose one camp or the other. There is room for all approaches. It seems a foolhardy leap to say investments are entirely irrelevant to how satisfied you make your clients as their trusted adviser. But, conversely, it would take a real purist to say that 100 per cent of your time as a financial planner should be spent picking the optimum funds for your client.

Finding the answer goes right to the heart of what the role of a planner should be. It is up to each adviser to seek the right approach for each client. Fee innovation will help with this. Fixed and hourly fees to segregate each service, if you truly believe they should be separated, will allow clients themselves to pick and choose the menu that best suits their tastes.

If they don’t want coaching and deep interviews about their life goals, so be it. If they actually want to see someone to take the weight off their shoulders in times of crisis, and not just run their money, that’s also fine. Deciding what to offer, and how much to charge, will be a skill in itself that advisers will no doubt master.


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There is one comment at the moment, we would love to hear your opinion too.

  1. I couldn’t agree more. As you say “It is up to each adviser to seek the right approach for each client” One size does not fit all and we offer our clients the choice… most select model portfolios ratehr than risk rated funds to match their identified needs, but that’s their choice.
    We use DM’s where they can definately do things mroe efficiently than us & add value (i.e. with BPR qualifying AIM shares).We use Multi Manager in other cases (in which case our fees/chargers should be and are lower as we’re doing less of the total work) and if someone really wants an entirely bespoke portfolio, then it’s possible…… but unrealistically expensive as no DM really does a bespoke portfolio for anything under about £500k now I would think, they are ALL just models, in which case, why not just use an MM fund?
    We’ve used a flowchart for the client to choose their journey to identify the service they want since April, it still needs a bit if work, but it seerms to help clients asppreciate who they are paying to do what.

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