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Platforum: Square Mile wins over advisers but what about investors?

In this week’s review of fund research agencies, we turn our focus to Square Mile Investment Consulting and Research.

According to our recent report, UK Fund Distribution: Research Agencies, 61 per cent of advisers use such services, a proportion that has remained stable since 2014. Of those that pick funds or create in-house solutions themselves, 9 per cent use research by Square Mile.

This may seem like a low level of adviser engagement for managing director Richard Romer-Lee’s outfit, but we believe it is a good result for
a relatively young agency.

Established in 2014, Square Mile seems to have connected with the adviser community faster than others and has attracted a particular niche of those at mid-sized firms. These advisers tend to have a high level of assets under advice and pick single strategy funds over others.

It is worth noting that all the Square Mile users in our sample also use at least one other research agency. In fact, we find most advisers use more than one, which is contrary to the findings of the FCA’s Asset Management Market Study so far. The proportion of advisers relying on a single agency has been decreasing since 2014, with 2.2 currently the number used on average.

Square Mile’s free to use Academy of Funds is the basis of its adviser services, including fund panel building, governance and portfolio management services. Its other revenues come from licenses that fund groups can purchase to use its ratings.

Ratings and services

The agency rates around 300 UK-domiciled funds and some Sicavs but it does not cover ETFs and investment trusts. Our research shows that advisers who recommend investment trusts are also more likely to recommend ETFs, so there is another part of the market Square Mile could tap into in the future by extending its coverage.

It did add tracker funds in 2015, which made sense given that sales have increased dramatically since the RDR. Their rising popularity with advisers makes it difficult for research agencies to ignore them, despite the additional expense of having to buy data from the index providers.

Square Mile offers a range of services to support and manage advisory and discretionary portfolios based on four outcomes: capital accumulation, income provision, capital preservation and inflation protection.

Its adviser clients’ portfolios are available on nine of the larger adviser platforms including Aviva, Old Mutual Wealth, Standard Life and Zurich.

Some research agencies also work with direct platforms to help them put together their select lists. Square Mile is a pioneer in this area, having worked with Willis Owen on its list a couple of years ago. As a result, Square Mile ratings are presented to Willis Owen clients that use either the fund search tool or one of its four select lists.

That said, Square Mile needs to do more if it wants to increase its awareness with the end-investor. This will not be easy but it is important. Indeed, our consumer research shows that around half of British investors blend advice and do-it-yourself investing, so research agencies can benefit in a number of ways from increased brand awareness in this area.

The potential increase of investment outsourcing could be positive for managed portfolio services from research agencies. However, the jury is out on whether this trend will continue and our data suggests it may have plateaued.

Where we think Square Mile is distinct is in its qualitative analysis, and its services align with some positive market trends, including increased demand for both in-house solutions and bespoke investment consultancy services.

Rodolfo Crespo is senior analyst at Platforum

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