RDR outsourcing: how to keep ahead of the curve

RDR outsourcing: how to keep ahead of the curve

Much has been written on the retail distribution review (RDR) and how it will impact on advisers: obviously most relevant for wealth managers is the extent they can take over retail investment management.

Much less has been written on how doing so will change the face and scope of wealth management businesses, however. Frequently, there has been an assumption the sector will merely be providing what it always has, albeit via slightly different distribution channels and another layer of intermediation.

Probe deeper, however, and this assumption looks more and more shaky. A wholesale and semi-commoditised service could scarcely seem more different from a discreet client arrangement.

Quite apart from the changing audiences that wealth managers are trying to serve, there is the impact on their own businesses. Installing an entire internal architecture capable of servicing advisers will obviously make new demands on resources, create new sets of priorities and ultimately create new winners.

So how is wealth management being changed by its new role at one end of the retail investment supply chain, and how do you get ahead of the curve?

A cultural change

Fraser Donaldson, head of funds analysis at Defaqto, which provides consultancy services to advisers looking to outsource, says wealth managers have been forced to change culturally and institutionally in just the three years he has worked in the sector.

Primarily this has been structural: the businesses that will soak up the bulk of adviser assets in the immediate aftermath of the RDR are those that have already made the biggest investment in dealing desks, aftercare staff, rigorous reporting systems and a unitised, standardised product.

‘Those managers who are serious are investing a lot in broker teams and service support desks. For someone like Brooks Macdonald, around 90% of their model portfolio capital is adviser business,’ said Donaldson.

‘It’s different from the private client world in the sense that it is less about a bespoke personal arrangement and much more about due diligence, performance charges and what is the ongoing [aftercare] service that you can provide for me?


Monday, January 30th, 2012 EN

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