We have all been through RDR, adjusted our business models accordingly and settled in to the brave new world of commission free, unbiased, client investing.
Many adviser businesses, whether restricted or independent, now have a centralised investment proposition (CIP) at their heart. Following guidance from the regulators these CIPs will contain a range of investment options with choices that are suitable for the majority of clients.
Typically, a CIP will contain multi-asset funds (usually fund of funds), Bespoke discretionary services and discretionary managed portfolio services.
It is no coincidence that the growth of discretionary services has coincided with the RDR, as advisers looked to outsource some or all of their investment process.
The old model of advisers managing their clients’ portfolios using single asset funds is slowly becoming a thing of the past.
It is accepted that entrusting client assets to full time, well resourced investment specialists (fund managers and discretionary managers) is going to be in the best interests of the client.
Of course there are some adviser firms that are big enough and resourced enough to operate their own asset management arm, but these are few and far between.
Growth in multi-asset and multi-manager funds has been a major success story over the last 15 years, which according to the Investment Association have grown from £11bn at the beginning of the new century, risen to £34.8bn in 2007 and stood at £127.2bn in 2016.
Perhaps more impressively this accounts for 12.2 per cent of all funds in 2016 compared to 7.4 per cent in 2007.
I am ‘veteran’ enough to remember back in the 1980s when multi-manager funds were viewed with some scepticism with whisperings of double charging and a feeling that advisers were not doing their jobs if they left their fund selection to a multi-manager.
However, with the above figures, you can more or less pin-point (early 2000s) when the outsourcing story had begun to take off, and really taken hold in the period leading up to implementation of the Retail Distribution Review.
So, what has all this got to do with discretionary managed portfolio services? I think there is a parallel to be drawn here in the evolution of this investment solution.
It is less than ten years since Defaqto started researching discretionary managed services (bespoke and MPS). Many of the people we talked to in the industry told us that discretionary services were rife with hidden charges and double charging was common.
Sound familiar? I cannot say whether these accusations were true or not, but the perception was there. It is true to say that charges were difficult to get to the bottom of, but I have not come across any incidences of double charging in discretionary management over the last eight years or so.
It seems that we picked up the discretionary story, some would say encouraged it, at the point where the discretionary industry was ready to join in on the outsourcing story that had been considerably strengthened by the RDR.
