Advisers turn to in-house investment


Employing an external wealth manager to help your IFA business grow may seem like a good idea, but there’s a downside to this that many advisers fail to realise until its too late.

Outsourcing investment management may give you greater expertise and free up more of your time, but it can leave you with a disjointed proposition that doesn’t present you in the best light to your clients.

There’s often a disconnect between the way the money is managed and the way you approach your other client needs, which can leave you wondering what you’re getting from the investment manager, and lead clients to question what they’re paying you for. Not a good position.

Having investment management within your business gives a fully integrated proposition to your clients. It is seamless and gives clients confidence not only in your ability, but also in the way their needs and aims are catered for.

Behavioural scientists tell us people are much more concerned about the downside of investing than they are the upside. The problem with outsourcing your clients’ requirements is that investment managers tend to come from a stockbroking background, where they’re used to an element of ‘churn’ in their client portfolios. After all, in the ‘good old days’ that’s how they made their money. The more trades they made, the more they took home.

For clients, of course, this strategy only ever eats into their returns, and makes it more likely in the long term that they’d lose out. So, those whizzkids caught up in the whirl and romance of trading and moving client money around may be patting themselves on the back, but aren’t the best thing for your client.

IFA clients are generally quite risk averse, or at best they’ll want a balanced approach to investing. Having a typically “stockbroker” attitude to their funds, unless they are mega wealthy and can afford to take the extra risk associated with that, would rarely be a good thing.

Having the money managed as an integral part of the business you own, means having control over the cash and the way the client approaches their finances, which in turn gives you and them the peace of mind that their wishes will be followed.

The fear of loss is a big driver in the decisions that most adviser clients make. Not knowing absolutely that a firm you are outsourcing client investment management to is following their – or your – instructions to the letter adds to that fear. But there is no need to feel you have to go down this route.

A growing number of small advisers recognise the need for this kind of resource and if that is so in your case you may want to consider becoming part of a larger firm where these services are integrated automatically into your business offering on your own terms. Admittedly, it’s not for everyone, but then again, outsourcing isn’t a panacea for your clients either.


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