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UK adviser hunger for outsourcing grows

Advisory wrap platform Nucleus has revealed that the number of financial advisers looking to use discretionary fund management (DFM) services is set to increase by 20%. 

The firm found that model portfolios (MPs) are among the most widely used investment solutions by financial advisers, with nearly half the respondents saying they allocate over 60% of client money to MPs. 

Nucleus surveys its users every year, and the 2020 census polled 180 professionals. 

As more planners look to outsource, the number of those willing to run their own MPs on an advisory basis has subsequently fallen by 16%. 

A further 30% admitted to not even considering building their own model portfolios. 


But what drives the outsourcing selection? 

According to the Nucleus census, 86% said cost was one of the main criteria in the process. 

More specifically, 47% of users expect clients to pay between 0.25% to 0.5% for investment solutions, while 29% said they were looking for a 0.5%-0.75% range. 

The second most important criterion was the actual investment process, which 72% of respondents said was a deciding factor in the outsourcing selection process, according to Nucleus. 

Greener choices 

ESG principles also feature in the outsourcing decision-making, as nearly half of those surveyed believe that sustainability and green considerations should be part of the investment solution. 

Only 8%, however, use factor-based investing as part of their approach. 

Barry Neilson, chief customer officer at Nucleus, said: “It is clear advisers want more time to further deepen the financial planning journey with their clients, which is leading more to outsource their investment decision-making processes, or to plan to do so in the future.  

With the cost pressures and capacity challenges facing advisers today, the increasing range of outsourced investment solutions that are available today can be a useful way for advisers to free up time to focus on financial planning.  

“Our goal is to build and maintain long-term relationships with advisers, allowing as much of the administrative burden to be lifted as possible.

“Research like this allows advisers to assess their own businesses and compare against other Nucleus users, meaning they can take on the challenges that the market currently presents and offer an even better service to their clients at a period where time is valued, he added. 

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