Financial advisers are concerned when it comes to outsourcing their centralised investment propositions (CIP).
While previously there was a worry that discretionary fund managers (DFMs) would ‘steal’ their clients, now what troubles advisers is losing control of the process and how much handing over investment responsibilities will cost them, research by Copia Capital found.
In a study of 200 advisers, the DFM found that, of those who outsource their CIP, a quarter were worried about losing control, while 24% about cost.
These were followed by concerns that the risk would remain with the adviser rather than with the manager (12%); worries around platform restrictions and a lack of choice of investment solutions (both 7%).
Robert Vaudry, managing director of Copia, said: “We know that many firms are already struggling with the administration of their in-house CIP following the additional reporting requirements of Mifid II and it’s likely that Consumer Duty will add further misery. An overwhelming 97% of the firms we surveyed believe that CIPs are at risk of becoming unmanageable.
“Outsourcing to a specialist provider is the obvious answer to help reduce the administrative burden of CIP management as well as some of the associated operational and compliance risk. However, firms are understandably worried about what that could mean for their firm in terms of remaining in control of the process, keeping costs down for clients, where different responsibilities will lie and how their investment and platform choice will be affected.
“When considering outsourcing your CIP, it’s important to recognise that not all external investment managers are the same, you need to fully research the options to understand the responsibilities of each party and how it will impact your CIP administration going forward and make sure you and your clients will benefit fully from the relationship.”
Previous research by Copia Capital found that outsourcing can benefit an adviser’s daily tasks with a 72% reduction in maintenance needs, 30% less time spent on reporting and a reduction of 25% in time spent monitoring portfolios.
