1st March 2011

Close: Investment Philosophy and Process the key to outsourcing for IFAs

Charges and investment philosophy are key drivers for advisers when selecting a discretionary fund management partner, the first adviser insight report[i] from Close Asset Management (Close) has revealed.   

Key findings

• Eight in ten (80%) advisers state cost as the main consideration when selecting a discretionary fund management partner
• Quality of service is also seen as a key factor with 79% of advisers citing it as important
• Investment philosophy is the biggest single driver overall
• Whilst over two thirds (68%) of advisers believe investment performance is also a vital consideration.

Growing regulatory and time pressures are driving advisers to increasingly outsource their investment management capability, yet there are few real benchmarks available to assist them in their selection process.  When asked what they look for in a discretionary fund management partner, eight in ten (80%) advisers state cost as the main consideration, followed closely by quality of service (79%).  Investment philosophy and process is also key with seven in ten (69%) advisers selecting this as a vital consideration and, overall, four in ten (40%) advisers claiming that it is the single most important consideration. 

Yet over two thirds (68%) of advisers also state that investment performance is a key consideration, ahead of overall reputation and brand (54%).  Worryingly, less than a tenth (9%) of the advisers interviewed for the survey factor in external ratings and research services, such as ARC or Defaqto, when selecting a discretionary fund management partner despite rarely having access to DFM past performance data directly. 

David Muncaster, Director of Intermediary Sales at Close Asset Management, comments on the findings:

“ It is vitally important that advisers are aware of (and able to compare) all the key attributes on offer by individual discretionary managers, including overall costs, investment process, performance and client service. All too often they find it difficult to distinguish between the merits of individual DFM services which means it is increasingly important for managers to be clear and transparent in what they are offering, how much they charge and how well they are doing. Our research highlights a need in this area and it is one which we at Close have focused on meeting.   If this clarity and transparency is in place, outsourcing becomes a very viable solution for many sectors of the adviser market”

For more information about Close Asset Management, please visit www.Closeam.com

[i] NMG IFA Census was conducted between 4th and 15th November 2010 among a data sample of 393 IFAs online.  NMG’s IFA Census has been running since 2004 and conducts minimum of 300 interviews with IFAs online each month from its panel of c 1,700 IFAs. NMG, as a member of the Market Research Society (MRS) Company Partner Scheme, abides by the MRS Code of Conduct

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