IFA outsourcing to investment managers increasing

Independent financial advisers (IFAs) in the UK will outsource the investment management of a larger share of assets in 2017, with regulation being one of the key drivers of the growth, according to research.

Cerulli Associates says the figure for IFA investment outsourcing is set to rise from 41.4% of assets under administration in 2015, to 45.9% in 2017.

Almost two-thirds of the IFAs that Cerulli surveyed outsourced to discretionary fund managers, followed by multi-asset funds and multi-manager/funds of funds, each of which were used by just over half of the advisers.

More than a third of IFAs outsourced to model portfolios managed by platforms. The research also showed that 2.2% used robo-advisers.

Cerulli’s research found that fund managers seeking to win business from IFAs should offer complete portfolio solutions, or sell into investment firms providing these solutions to gain IFA business indirectly.

Barbara Wall, managing director of Cerulli Associates Europe, said that merger and acquisition activity in the financial advice and wealth management market increased exponentially following the UK Retail Distribution Review, and that the industry had become divided between large, multiservice advisers and wealth management companies on one hand, and small, traditional, independent advisers on the other.

“The smaller players are more likely to have to outsource investment allocation,” she said.

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