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Majority of advisers outsource portfolio management, survey finds


The majority of investment advisers now outsource portfolio management, according to the latest Schroders Adviser Survey.

Findings from the Q4 research, which canvassed 252 investment advisers, show the total number of advisers outsourcing portfolio management has risen above 50 per cent for the first time while the proportion of advisers who choose not to outsource has dropped to 48 per cent.

17 per cent of advisers outsource over 50 per cent of client assets. 9 per cent outsource up to 50 per cent of assets, 10 per cent outsource up to 25 per cent of assets and 17 per cent outsource up to 10 per cent of assets.

The majority of advisers who outsource portfolio management to services such as multi-managers, wealth managers, platform solutions and rating agencies expect to remain with the provider they currently use for the next 12 months, which Schroders co-head of intermediary James Rainbow says shows “the market appears to be bedding down”.

Advisers are now showing a preference for how they charge clients, with percentage basis fees the most popular method for 57 per cent of advisers. Only 3 per cent of advisers charge a fixed fee and 1 per cent an hourly rate, while 38 per cent charge a combination of all three. In 2015, Schroders found charging a combination of all three was the most popular method at just over 50 per cent.

The average fees charged by advisers are increasing, this year’s survey shows. The largest proportion of advisers – 43 per cent – charge an average of 75 basis points, compared to last year when the number of advisers charging an average of 75 basis points and those charging an average of 50 basis points were similar at about 35 per cent each.

This year 28 per cent of advisers said they charge an average of 50 basis points, while 24 per cent charge an average of 100 basis points and 5 per cent charge more than 100 basis points.

Rainbow says: “Advisers have pricing power on their side more now than they did before.” 

The number of advisers segmenting their client base according to size or revenue is similar to last year at 48 per cent, with a further 14 per cent planning to segment, and the proportion of advisers who have asked smaller clients to leave has only risen fractionally to 20 per cent.

However, the exclusion point in asset terms of those asked to leave has increased, suggesting the advice gap is widening. In 2015, the majority of clients asked to leave (36 per cent) had assets of less than £25,000, while in 2016 the majority of clients asked to leave (48 per cent) had assets of less than £100,000.

Rainbow says: “The average pension pot is below £30,000. This shows the increased need for other types of advisers.” 


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. So pray tell what exactly is the client paying the adviser for? Hand holding and gazing into his/her big blue eyes.

    On the basis that you would do to clients as you would be done by, I can certainly gurantee that I wouldn’t stand still for this for a moment. I would go direct to the DFM. Who on earth needs such an adviser.

    There is an exception. If say the clkient wants to invest £1million. It is not unknown for the adviser to take on a proportion in say either ISAs or Bonds (so there is no tripping up on CGT) and then the DFM does the rest. Or the adviser does all the Bonds and pensions and the DFM does the rest or any such combination. But at least the adviser is doing something. And of course there is no charge for the assets managed by the DFM – otherwise you have double (or even triple) charging.

  2. Trevor Harrington 6th December 2016 at 5:14 pm

    There are some very interesting deductions that one can make from these figures. However, in doing so, some caution needs to be exercised as it would be easy just to try and illustrate one’s own particular point of view.

    Having said that we can draw some specific and categorical statements which surely are completely incontestable.

    1) Very few Advisers charge by an hourly rate, as it is not acceptable to the very great majority of the public.
    2) Virtually all Advisers continue to charge for transactional functions, where previously they charged by a commission.
    3) Advisers now make additional charges for specific functions, where previously they did not charge at all, as there used to be no commission in the function concerned.
    4) Virtually all clients prefer to pay their Adviser through their products or through their investment holdings, rather than receive a bill which needs to be paid from their current account.
    5) Ongoing maintenance fees for the Adviser are all paid from the client’s investment holdings, with practically no exceptions to this rule.
    6) Ongoing Adviser fees have increased inexorably from the previously accepted normal standard 0.5% per annum of client funds, to what is fast becoming the norm for the profession at 0.75% per annum, and that is inevitably rising to 1.0% per annum.
    7) More and more Advisers are refusing to deal with the smaller client, regardless of the old adage “big trees from little acorns grow”, as they are simply no longer viable. This is especially so since the ability to cross subsidise, in the same way as all other professions do, is being progressively denied to the Adviser profession.
    8) The smaller client was often previously categorised at below £25,000 in invested funds, but that category is now rising to £100,000 in invested funds.
    9) The numbers of people being denied top quality advice from a professional Adviser is growing.

    Hardly debatable … certainly incontestable facts …

    You must draw your own conclusion as to how this unwanted and very unpleasant state of affairs came about, and having drawn your conclusion, it must surely be that somebody somewhere should have said something to alert the people concerned at that time, rather than at this very late stage in the day.

  3. “4) Virtually all clients prefer to pay their Adviser through their products or through their investment holdings, rather than receive a bill which needs to be paid from their current account.
    5) Ongoing maintenance fees for the Adviser are all paid from the client’s investment holdings, with practically no exceptions to this rule.”

    Sorry Trevor you are way out on both counts. All my clients paid from their bank accounts. Why reduce a tax advantaged ISA or pension by taking payment through the product? Anyway clients pay for advice – the product is free. If they don’t take the advice – they still pay. If properly explained and the client can see the logic and cost effectiveness I can assure you there is no problem. At least with the clients I had. If you are going to take on any old client than maybe that’s a different matter, but anyway your concept is so last century. Are you also going to tell me that you cross subsidise – that those who buy pay for those who don’t?

    • Trevor Harrington 6th December 2016 at 6:22 pm

      Not according to the figures in the above article …
      You are obviously unique …

      • Trevor Harrington 7th December 2016 at 9:44 am

        Oh and another thought …
        Every profession cross subsidises to a degree …. even you do …
        It is just a matter of degrees …
        It is only our regulator who got it’s nickers in a twist over this one … oh and you by the sounds of it….

        Happy Christmas Harry

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