In 2016, the wrap platform saw one in five survey respondents say they planned to hold discretionary permissions.
This has now dropped to one in 10 in 2018, while the percentage of advisers that already hold these permissions has remained constant at 8%.
Receiving discretionary permissions allows an adviser to act quickly on an investment without having to seek a client’s approval.
Polarisation
In-house model portfolios continue to gather the largest proportion of client investments. This year, 45% of all users with in-house model portfolios will allocate over 80% of client monies into this solution, up from 34% in 2017.
Discretionary fund managers (DFMs) continue to polarise opinion among Nucleus users, researchers for the platform discovered, with 22% of those that use them expecting to increase their allocation in the next year, and only 6% expecting to decrease.
Interestingly, over the longer term, 43% say they won’t use a DFM, about the same as those who say they will begin or increase using, while only 14% said they would decrease or stop using.
Rumblings
Barry Neilson, chief customer officer at Nucleus, said: “There has been continued rumblings in the market that adviser applications for discretionary permissions was on the up, so it is perhaps surprising to find our users supposedly buck that trend.
“With so many advisers still building their own in-house model portfolios, it is important that they realise the administrative burden this can have if they operate these on an advisory basis.
“While one option could be to outsource these functions to a discretionary investment manager, we can see from the stats that not all advisers are sold on the value add these partners can bring to a business.
“Whether an adviser is using one or has its own permissions, they need to ensure that the necessary due diligence is carried out, and that the operational processes are robust, consistent and provide the customer with the best service and outcomes as possible.
“Advisers risk tarnishing the reputations they have built up over a long period of time if they underestimate or don’t implement either process carefully and effectively.”
Founded in 2006 Nucleus has at 31 March 2018, assets under administration on the platform were £13.9bn ($18.3bn €15.6bn).
