The post-RDR rise of centralised investment propositions in adviser firms has led to a fertile market for research agencies. Whilst a swathe of advisers chooses to outsource portfolio management, the majority are still selecting funds and running in-house advisory model portfolios.
Financial advisers make use of research agencies in several ways: using fund research and ratings to build model portfolios and recommend solutions, buying in ‘template’ portfolios and creating model portfolios and shortlists of funds with the assistance of the agencies’ consultancy services. Advisers can also choose to outsource running money to one of the discretionary managed portfolio services offered by four of the leading research agencies, suggesting an even greater influence in the adviser market.
Some 86% of financial advisers now use third-party research for their firms’ investment propositions and we estimate that the research agencies influence two-thirds of total advised assets.
The level of agencies’ influence on the adviser market will grow as more and more adviser firms adopt centralised investment propositions and lean on the expertise of third-party research and ratings. In particular, research agencies are extending their influence in the advice market through partnerships with many of the larger adviser firms, networks and support service providers.
Asset managers who are reviewing their distribution strategies in the retail space should pay close attention to the large and growing power that research agencies have achieved over adviser fund selection.
We have just published our latest UK Fund Distribution report, The Influence of Research Agencies. This report looks at how third-party research and fund ratings influence fund selection by both financial advisers and self-directed investors. Download an outline of the report here or get in touch for more information.