Is it time for you to outsource your investment management?

How much of your time do you spend on the things you excel at – advising clients, setting goals and objectives, cashflow management, and so on?

If it’s less than you’d like, you’re not alone. Back in 2016, the Federation of Small Businesses found that two-thirds of small business owners in the UK said their administrative burden was preventing them from focusing on the primary aims of their business. More than half (55%) said that admin was holding back growth of their companies.

The most telling statistic was that three-quarters of all small business owners said that they spent more time than they would like on issues ranging from tax, employment law issues and insurance to dealing with workplace pensions, accounting tasks or health and safety matters. For financial planners, these tasks may also include investment management.

There are many reasons why you might be reluctant to outsource the management of your clients’ money. You might feel more confident looking after this aspect of the business yourself, or you may have concerns that a discretionary fund manager (DFM) may ‘steal’ your clients from you.

However, the outsourced model has many benefits for advisers. As well as freeing up the time you might have spent making investment decisions to spend on the financial planning aspect of your role, you may also have more time to take on new clients and grow your business.

What clients expect from you as their financial adviser

What do your clients value most about your service? When I see the results of client surveys, and analyse feedback from clients, one thing is clear: very few clients identify ‘return on investment’ as the key reason they work with a financial adviser.

If you asked your clients “what’s the most important thing your financial adviser can do for you?” how many would answer “manage my investments?” The likelihood is that it wouldn’t be very many. Most of your clients understand that you specialise in life-centred financial planning and that the specific products and funds are only one tool to enable you to help them to reach their goals.

Clients routinely identify reassurance, peace of mind, clarity, and security as the key reasons they work with a planner. They treat you as a trusted professional, with responsibility for all aspects of their financial plan. You’re there to help them achieve their life’s ambitions.

What this means is that there is not necessarily a need for you to also act as an investment manager – even if you have significant expertise in this area.

Many advisers these days choose to position themselves at the heart of the client relationship and to accept the responsibility of identifying the suitable investment mandate. It’s then the role of the DFM to ensure that the portfolio performs according to that mandate.

Increasing numbers of advisers accept the argument that they simply don’t have the capacity to manage a client’s investments fully and carry out the financial planning function including tax and pensions, protection, cashflow modelling and estate planning. On top of this, you also have the emotional and coaching elements of your role, such as nurturing, reassuring, educating, and understanding clients’ aims, fears and aspirations.

When you outsource investment management, the DFM takes on the responsibility of managing the portfolio on a day-to-day basis, freeing you up to concentrate on the things you’re really good at – developing client relationships and providing comfort. It means you can spend more time with clients focusing on what is more important for them, not just the return on their investment.

Other benefits of outsourcing investment management can include a potential reduction in the regulatory burden and removing the pressure of monitoring a huge and ever-changing myriad of funds and other investments.

If you have the resources and skill to manage your clients’ money, then you may have concluded that you can deliver as good an outcome as anyone. In this case – keep going!

However, if you find you can’t spend the time you want with your clients, or you feel a DFM has more skill and expertise, it could be more attractive to outsource this aspect of your business.

What you should look for in an investment manager

If you have decided to outsource, there are several things you should look for when you’re comparing investment managers:

  • Clear and regular updates about clients’ investments and changes to portfolios
  • Access to the fund managers who are managing the investments on behalf of your clients
  • Product and educational resources for you to use with your clients to explain investments in a concise and engaging way
  • Transparency on costs and charges.

For many, managing a client’s investments is a core part of their offering. And that’s great! However, if you do want to grow your business and concentrate on the financial planning aspects of your role – where your core skills may lie – then it might be time to think differently.