24 February 2020
By John Husselbee, Co-Fund Manager DMS Verbatim Portfolio Growth Funds
Outsourcing investment management via multi-asset and multi-manager funds has become a core feature of the financial advice market over the past few years. According to research that Liontrust carried out last year, of those advisers who use outsourced investment managers, they do so for an average of 51% of their client base.*
The arguments in favour of outsourcing investment management have been extensively aired and discussed, including the fact that it can allow more time for advisers to devote to their existing and potential clients, potentially reduce the regulatory burden and take away the pressure of monitoring a huge and ever-changing universe of funds and other investments. As such, we continue to state the case for the DMS Verbatim Portfolio Growth Funds in line with that narrative.
But while these are among the potential benefits, how successful have investment partnerships actually been for advisers in reality? To find out, Liontrust asked advisers what has worked in their relationships, what value do they place on these partnerships and what are their concerns about outsourced investment management.
Advisers stated that the three most important attributes they expect from their investment partners are: experience, knowledge and a proven track record; a robust and repeatable investment process; and value for money. For their existing relationships, advisers’ strongest levels of satisfaction are with investment managers’ ability to offer robust and repeatable investment processes.
According to advisers, their investment partners need to improve in terms of costs, transparency, value for money and meeting client expectations. Of the respondents, 41% say they pay too much for the returns generated by their investment partners and 47% want them to improve the competitiveness and transparency of costs. But this is not simply a question of costs, with 91% of advisers saying they are willing to pay more for consistent performance from their investment partners, while 74% will pay more for strong service levels beyond performance. This is reflected in the fact that 91% of advisers say value for money is important when it comes to selecting investment partners and 54% of advisers want their investment partner to do more to provide value for money.
In evaluating whether investment partners are delivering value for money, it is not surprising that 73% of advisers say the best return for the best price is the most important factor. Advisers, however, identify a number of other contributory factors beyond cost and performance, including excellent administration (60% of advisers), superior service (50%) and good quality reporting (42%). Transparency of costs and charges is important to 97% of advisers and this needs to be at the core of the relationship between advisers and investment managers.
There are many ways in which investment managers can and should deliver transparency beyond cost and charges. These include clear and regular updates about clients’ investments and changes to portfolios, frequent access to the fund managers who are running client portfolios, and product and educational content for advisers to use with their clients to explain investments in a clear and engaging way.
It is also important for the investment partner to have full transparency from the funds and managers they are investing in on behalf of advisers and their clients.
The research revealed that 36% of advisers find it challenging to assess the suitability of funds and portfolios, which investment partners are able to help with. Providing a broad range of target risk portfolios, for example, enables clients to choose those that are appropriate for their individual objectives and appetites for risk. Through target risk, portfolios can be designed to deliver the outcome expected by clients and thus match suitability. What is clear from the research is that the onus is on investment managers to demonstrate how we can deliver added value to advisers and their clients and how we can help advisers with their challenges such as suitability. The DMS Verbatim Portfolio Growth funds offer advisers access to risk-managed, multi-asset solutions that are managed by two of the most experienced fund managers in the market with long track records of meeting the expectations of advisers and their clients. Each of the risk-managed, multi-asset funds is designed with a clear mandate and strive to “win over the long term by not losing” through managing risk and limiting losses in falling markets to enhance long-term returns within each risk profile.
For more information on the DMS Verbatim Portfolio Growth Funds please contact us 0808 12 40 007 or email us at firstname.lastname@example.org .
*Source: Evaluating the success of investment partnerships for advisers, Liontrust, 2019
The value of investments and any income from them can go down as well as up and is not guaranteed. Your clients could get back less than they originally invested. Past performance is not a guide to future performance. The portfolios' investments are subject to normal fluctuations and other risks inherent when investing in securities. Verbatim Asset Management has taken due care and attention in preparing this document, which is solely for the use of professional advisers. Verbatim cannot be held responsible for any inaccuracies arising out of information detailed within and will not accept liability for any loss arising out of or in connection with its use. This article is for information only and should not be deemed as advice.