How ‘in-house’ are advisers’ in-house investment propositions?

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There is a significant amount of third-party influence on financial advisers’ investment propositions. Our latest research finds that even portfolios built ‘in-house’ tend to be heavily influenced by external groups such as research agencies, risk profiling tools, DFMs and investment consultants.

We’ve identified three main types of in-house investment propositions:

  • Model portfolios: the more process-driven advisers have centralised investment propositions that use risk-rated model portfolios. This is the most common route and makes up the largest share of advised assets.
  • Fund picking/bespoke portfolios: there are still a lot of fund pickers out there – either advisers who create bespoke portfolios for every client or those who do it for a few by exception.
  • Multi-asset or multi-manager funds: increasing numbers of advisers are using such funds for lower value portfolios.

Investment decisions ultimately lie in the hands of adviser firms for each of these three investment strategies. However, ‘in-house’ tends not to be all that that in-house.

Just under two-thirds of advisers admit to being influenced by research agencies and almost all use them in some capacity. This isn’t just advisers filtering by funds with the top ratings. As research agencies have broadened out their capabilities, they have become much more ingrained in advisers’ investment processes.

A recurring theme at last week’s Platforum ID conference was that the value chain between asset managers and end investors is becoming far more crowded with different intermediaries. Successful companies will be those that understand the changing dynamics and pinpoint exactly which influencers they need to be approaching.

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