Financial advisers expect surge in discretionary managed investment services, study finds

Financial advisers across the UK are gearing up for substantial growth in the discretionary managed investment service sector, according to a study.

The research by wealth manager Investec Wealth & Investment (UK) has indicated that over 90% of financial advisers currently rely on third-party bespoke discretionary managed investment services for their clients.
Furthermore, 94% of these advisers anticipate a surge in the utilisation of these services over the next three years. According to the researchers, this surge is driven by the desire to enhance client service offerings and accommodate more clients efficiently.

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According to the researchers, the appeal of discretionary managed investment services lies in their ability to actively manage portfolios on behalf of clients, enabling swift responses to market changes and the seizing of favourable opportunities. As a result, financial advisers can focus on delivering personalised advice while delegating day-to-day decision-making to trusted wealth managers.

Over the past five years, the adoption of these services has seen a steady rise, with 61% of financial advisers reporting an increase. Only 31% observed no change, while 8% noted a decrease in usage during the same period, as per the study.
94% of surveyed financial advisers anticipate a continued uptick in the adoption of discretionary managed investment services. More than half (52%) foresee a “dramatic increase” driven primarily by the desire to enhance client service quality and expand their client base.
The primary driver for the expected increase is the ability of discretionary managed investment services to enhance client service, followed by scalability for advisers, regulatory pressures, and improving overall proposition attractiveness.

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Simon Taylor, head of strategic partnerships at Investec Wealth & Investment (UK), highlighted that as clients transition into retirement, advisers face increased pressure due to investment risks, Consumer Duty requirements, and the FCA’s pension review.

“The financial adviser and wealth management sector is increasingly finding more ways in which they can offer clients a better, more valuable service – while at the same time taking on more new clients.
Our research shows that more and more firms are using third-party bespoke discretionary managed investment services to deliver value to clients and free up advisers’ time to take on more new clients,” added Taylor.

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