The concept of outsourcing has become a conventional norm in the UK advice market – and the industry believes it will become even more prominent due to the implementation of the Financial Conduct Authority’s (FCA) Consumer Duty regulation.
Advisers seeking more time with clients are outsourcing elements of their services such as investments to firms like DFMs and wealth managers.
Outsourcing is also now becoming a topic of discussion for advisers in regions like the UAE.
But the discussion is currently still about whether advisers want to give up “control” – and if it is beneficial to them.
International Adviser spoke with consultancy business Maplesden Griffin and Partners, Canaccord Genuity Wealth Management, Kingswood and Titan Wealth to discuss the role of outsourcing in the UAE advice market.
Nick Griffin and Mark Maplesden, co-owners of Maplesden Griffin and Partners, said: “The investment aspect of the advice process is so complicated and time critical, delegating the execution of an agreed overall investment strategy to a DFM with the right investment skills, knowledge and qualifications, helps to make an adviser’s job easier and increase the confidence of their clients.
“Whilst the absolute results and return will always be important, in an age where clients have so much access to data and information, the detailed investment analysis a specialist supplies can help advisers to perform much more efficiently and strengthen a client’s conviction in the advice process as a whole.
“Discretionary fund managers bring a wealth of experience and specialised knowledge to the table. They possess a deep understanding of global markets, economic trends, and investment strategies, making them well-equipped to navigate complex investment landscapes. By leveraging their expertise, you can provide your expat clients with access to a broader range of investment opportunities and potentially enhance their risk-adjusted returns.”
Another area of discussion for the benefits of outsourcing is giving advisers the ability to keep up with ever changing regulation.
Richard Burden, head of international sales at Canaccord Genuity Wealth International, said: “Regulation continues to evolve in the Middle East and outsourcing investments is going to become mandatory, we have seen this direction of ‘traffic’ in other countries so it makes sense to start the transition now.”
Paul Surguy, head of investment management at Kingswood, added: “Regulation is driving the roles of advisors and investment managers further and further apart. In truth, this can only be good for the end client. Wealth Planning and Investment Management encompass some of the same skills, but both need their own dedicated professionals 100% focused on their role for the client.”
For many years, some advisers have failed to show their value to clients.
Outsourcing can help play its part in allowing advisers do what they do best – financial planning.
Burden said: “I like to use a healthcare analogy: IFAs, intermediaries and wealth managers are the GPs, excellent practitioners in what they do but not experts in every area. We are the specialists they can call on when they need specific investment solutions and oversight.
“Advisers may be highly skilled and experts in financial planning, but they may not have all the answers, so it is important for them to have the backing of professional partners and this is where we can add significant value.
“Ultimately we, and they, are focused on delivering the best service possible to the client. The IFA, intermediary or wealth manager, can concentrate on what they do best and, as client needs become more complex over time, they can call on us to help them find the most effective and targeted solutions.”
Surguy added: “By building relationships with a select group of trusted Investment Management Groups advisors will be able to agree market leading rates which can be passed onto their clients whilst also accessing well diversified portfolios that are constantly monitored and adjusted – which is becoming ever more important in today’s fast-moving environment.”
Mark Livesey, head of sales at Titan Wealth, said: “Both off-the-shelf and advisory solutions are, in our opinion becoming outdated. By outsourcing, businesses that value each individual client’s investment strategy can develop and integrate bespoke solutions specifically tailored to their client’s desired outcomes.
“For example, long-term sustainable investment portfolios allow clients to generate capital whilst supporting humanitarian causes, delivering financial returns but also fulfilling ethical or social objectives.”
The average expat clients’ financial affairs are becoming more complex, and regulation continues to take its toll.
Advisers doing investments for their clients is just another task among a large list for IFAs.
So, is the concept of advisers doing investments becoming an outdated nature of the job?
Livesey said: “Recent years have shown that markets are more volatile than ever. Outsourcing to a DFM allows experienced investment teams to act proactively rather than reactively, taking advantage of quick movements in the market. Partnering with a DFM to build a bespoke solution designed for a retail client’s requirements, risk rating and individual objectives allows advisers to focus on their advice and client relationships.
“When working with international clients, investment performance almost becomes irrelevant if the tax planning isn’t done correctly. Allowing advisers to focus on planning, whilst staying informed by an investment partner drives a better outcome for clients.”
Griffin and Maplesden said: “There are so many aspects to the financial advice process – the area of choosing investments is one part of this.
“So, whilst clients will of course expect to receive advice on this, those advisers that are partnering with DFMs can explain to their expat clients the advantages that such a relationship with DFMs can have to enhance portfolio performance and client satisfaction. By leveraging the expertise and specialized knowledge of DFMs, you can provide tailored investment strategies that align with your clients’ goals and risk profiles.
“The diversification and risk management offered by DFMs help protect against market volatility and maximize potential returns. Moreover, the active portfolio monitoring and adjustments performed by DFMs reduce investor stress and time commitment. By utilising DFMs, you can offer your expat clients a comprehensive investment solution that combines professional expertise, personalised strategies, and peace of mind.”
Future of outsourcing in Middle East
There are a handful of advisers utilising outsourcing to its full effects – and this will continue to rise.
The future of outsourcing in the UAE and the Middle East should carry on its trajectory similar to the UK advice market.
Canaccord’s Burden said: “The regulatory and operational landscape is going to change significantly over the next few years and reputation management, best practice and maintaining a competitive edge are going to become even more important than they are now.
“To de-risk their business and enhance their role in the market, IFAs, intermediaries and wealth managers will need to work with trusted partners who are first rate, transparent and equipped to help them achieve better client outcomes. I think it is important to reiterate that our role is about the end client and helping them realise their financial goals. Working in partnership with their financial adviser we can do that.”
Titan’s Livesey said: “The region undoubtedly has huge opportunity. That paired with the strengthening regulatory framework makes it increasingly more attractive to large asset managers such as Titan.
“The strongest advice firms are already ahead of the curve in relation to regulatory requirements and expectations, charges and proposition are coming under pressure, therefore service, investment performance and sound advice have become more important, and so working with strategic partners to achieve this outcome will just continue to grow.
Griffin and Maplesden added: “The UAE financial sector is developing and evolving at a rapid pace – as witnessed by the recent influx of firms that are now based here. With this comes a greater spotlight on the industry as a whole, and that is why the sector has continued to evolve to meet the new emerging trends of increased regulation to ensure there is a strong ‘culture of confidence’ amongst customers.
“Firms that embrace these investment protocols will not see it restrict business, but instead be an impetus for its future expansion and help to ensure faith and trust in the industry as a whole. The signs are certainly very encouraging and I think we would expect to see in the coming months, and years, many more advisory firms adopting an outsourcing approach alongside a panel of DFMs.”