Asset managers need to build wider relationships in order to gain from rising levels of investment management outsourcing by independent financial advisers (IFAs), Cerrulli Associates says.
The firm noted that outsourcing by IFAs in Europe of investment management and asset allocation decisions is rising and should reach 45.9% – up from 41% of firms – next year.
In light of this, Cerulli said asset managers should consider selling into multi-asset and discretionary fund managers (DFMs), at least in some cases – although they should not neglect direct relationships with advisers.
In its Cerulli Edge report, the firm recommended two main distribution strategies in the “increasingly outsourced” IFA world.
These are to provide complete portfolio solutions – multi-asset funds, for instance – or sell into investment firms that already do so; and sell to DFMs, thereby indirectly gaining IFA business.
Barbara Wall, Cerulli’s European managing director, said: “Do not underestimate the importance of ongoing dialogue with IFAs and of building close relationships with both IFAs and the players within the outsourcing space, such as risk-profiling companies and rating agencies.”
Cerulli also noted that many advisers and their clients were making greater use of passive investment options to reduce costs within portfolios, and asset managers needed to bear this in mind when building solutions.
The firm’s research indicated 36.4% of DFMs expected to increase their passive investments over the next 12-24 months and 9.1% expected to lower them.
The DFMs surveyed by Cerulli identified investment process as the most important of fund selection criteria, followed by an existing or legacy relationship. Brand recognition was ranked third.
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