The power of two; bringing together your strengths and ours

The term ‘outsourcing’ has passed into everyday business language, but for many financial advisers who work with discretionary managers, it doesn’t quite hit the mark.

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Nov 12, 2019
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Dictionary definitions typically focus around obtaining goods and services from an outside supplier or employing another organisation to do some of the work. The challenge at the heart of these definitions is to define where responsibilities lie. It’s not about abdicating these but working in partnership with a trusted third party.

For many advisers, describing this relationship as a ‘partnership’ will be too monogamous – they will have a number of investment partners. Client segmentation should lead to requirements for a range of investment solutions delivered by different providers.

It’s therefore of key importance to be clear about ‘who does what?’ and where the responsibilities of each party sit.

Two areas to consider are suitability and communication.

Suitability – In the majority of outsourcing relationships the adviser takes responsibility for suitability. This encompasses agreeing the client’s attitude to risk, capacity for loss and financial goals. For example, if the client requires a bespoke portfolio there should be a discussion with the discretionary manager to agree the investment mandate and any specific requirements the client has, such as investment inclusions, exclusions and tax planning. The role of the investment manager is to manage the portfolio based on all these financial planning requirements and goals.

In a platform model portfolio scenario, the position is slightly different as the adviser takes responsibility for the suitability and ensures that the model portfolio selected is appropriate for their client. The investment manager ensures the model continues to adhere to their documented mandate.

Communication – In the examples above, the adviser is responsible for ensuring that the investment remains suitable on a ongoing basis and relies on effective, timely and relevant communication from the investment manager.

All parties have clear roles and responsibilities.

The Senior Managers and Certification Regime (SM&CR) effective from December this year, supports these points. SM&CR is not just an administrative exercise but aims to reduce harm to consumers and create a system that holds people to account.  In order to achieve this, roles and responsibilities have to be clear. This is also true of the outsourcing model.

In summary, I haven’t found a word which could replace ‘outsourcing’ because it should describe a combination of expert financial planning and investment management when combined deliver excellent client outcomes. As an investment manager, it’s simply about ‘bringing together your strengths and ours’.

Gillian Hepburn, Intermediary

Solutions Director, Schroders






To find out more: schroders.co.uk/outsourcing 

Important information

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the  amount originally invested. Schroders has expressed its own views and opinions which may change. 

This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Nothing in this material should be construed as advice or a  recommendation to buy or sell. Reliance should not be placed on any views or information in the  material when taking individual investment and/or strategic decisions. No responsibility can be  accepted for error of fact or opinion. Issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU, registered No. 1893220, who is authorised and regulated by the Financial Conduct Authority.


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