AJ Bell Investments has changed its managed portfolio service (MPS) so it will be operated on a Reliance on Others (ROO) basis, meaning advisers will not be responsible or liable for any investment decisions made within the underlying portfolios.
Previously, the AJ Bell MPS was managed on an Agent as Client (ACC) basis, whereby it treated the adviser as a professional client per se, rather than the end investor.
This means the MPS provider has no relationship with the end client and as a result, if something goes wrong, it is the adviser is at fault, not the provider. The adviser, therefore, could be liable for customer complaints with respect to the underlying investments in the MPS, tying up their time, compliance resources and potentially impacting their PI cover.
Shared responsibility
While the working practice of how services are delivered using the ROO model is very similar to ACC, the main difference is both the adviser and the MPS provider have a legal and regulatory duty of care to the end client.
Under the ROO model, the client is treated as investor, meaning there is a direct relationship between all three parties: the adviser, their client and the MPS manager.
It means the responsibility for managing the portfolios solely rests with the MPS manager, leaving the adviser to assess only the initial and ongoing suitability of the MPS solution itself – the same as if choosing a multi-asset fund.
“This is a change driven by advisers,” said Kevin Doran, managing director of AJ Bell Investments. “Having operated our partnership portfolios on a ROO basis for a number of years, many advisers have told us that they’d prefer the MPS to operate on the same basis.”
He added: “Advisers will understand the importance of that to their business, both in terms of the reduction in risk it delivers and the substantial time savings it will generate.”
The changes apply to the entire AJ Bell MPS range, which encompasses active, passive, ‘pactive’ and responsible MPS options, as well as its Retirement Portfolio Service, a centralised retirement proposition for clients in drawdown.
AJ Bell has updated its terms and conditions for its MPS, but said no action is required from advisers. It added that neither advisers nor their clients will see any difference in the way the MPS operates.
