Brewin Dolphin, Brooks Macdonald and LGT Vestra are the DFMs winning the most business from financial advisers looking to outsource their investment propositions, while fewer are using Cazenove and Parmenion, a study has found.
The report, commissioned by Nextwealth and the Personal Finance Society (PFS), aims to provide a more coherent picture of the UK’s “fragmented” financial planning industry which is made up of hundreds of mostly small businesses.
Of the 482 financial planners and PFS members who were polled in the online study, 44% said they outsourced to discretionary managers. The study found that financial planners use an average of 2.3 DFMs.
Brewin Dolphin emerged as the top destination for outsourcing investments with 36% of planners saying they used the wealth manager in this area.
Brooks Macdonald and LGT Vestra were the second and third most popular choices among advisers (25% and 20% respectively), followed by Quilter Cheviot and Seven Investment Management (both 18%).
Source: Nextwealth and Personal Finance Society
Advisers not keen
Fewer advisers outsourced investments to the Schroders-owned wealth business Cazenove, Tatton and Parmenion which all received 5% of the vote a piece.
Rathbones and Investec also appeared on the lower end of the spectrum, with 8% and 7% of planners admitting they use them, respectively.
Investec was recently labelled the UK’s most expensive wealth manager in a leaked report examining charges across the 20 largest firms in the industry, while Rathbones emerged as the second priciest option.
Discretionary managers who were mentioned once or twice in the survey were lumped into the ‘Other’ category. Those firms with more mentions include Liontrust, Tilney, Waverton Investment Management, Canaccord Genuity and Smith & Williamson.
Bias toward active and slow on ethical uptake
Alongside advisers’ preference for outsourcing investments, the report also found IFAs were more likely to stick their clients in active funds and less likely to have conversations around ethical or responsible investing.
Though the study found the majority of respondents use both active and passive funds, there is still a clear bias for active investing.
Two thirds of client assets are tied up in active solutions compared with 32% in passive portfolios. One in 10 financial planners has less than one quarter in active funds, while nearly half have less than a quarter in passive solutions.
Meanwhile, 82% of financial planners said they use ethical funds or portfolios. But this only accounted for an average of 7% of client assets.
Ethical investing comes up in fewer than one-in-10 conversations with clients, the study found, though female planners and advisers over the age of 55 were more likely to use ethical funds or portfolios.
Dearth of female planners
Women made up just one fifth of the survey respondents. They were also found to be younger than their male counterparts on average (between the ages of 39 and 54) and managing a lower level of assets.
Personal Finance Society chief executive Keith Richards said: “This research gives an insight into the make-up of the financial advice profession in 2019.
“It is vital that our profession reflects the diversity of the clients that they serve in an ever-changing society where expectations of inclusivity are the norm.
“With changing demographics our perspectives are growing, and it requires a broad range of people to understand the intricacies of individuals, their different lifestyles, and therefore their different needs.”
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