The study, conducted by London-based Scorpio Partnership on behalf of Momentum Global Investment Management, found that more than 65% of independent wealth advisers (IWA) say they are choosing more proactive discretionary fund managers.
Representatives from some 40 institutions across the UK, Hong Kong and Singapore markets, which collectively manage more than $8bn, told the Scorpio researchers that the changing regulatory landscape, including the RDR in the UK, was among the main reasons for this change in their approach.
Other reasons cited included a desire to target higher net worth clients, pressures on margins, and a need to be able to demonstrate greater involvement in the investment process, Scorpio said.
Summarising their findings, the Scorpio researchers noted that this trend would serve as a "stark reminder" to investment managers that IWAs "will not just purely be a passive distribution arm to end-HNWs".
Explained Sebastian Dovey, managing partner at Scorpio Partnership: "The advisers surveyed recognise that a proactive involvement in the investment process will support their ability to charge better fees to their premium clients.”
The research was conducted as part of a research programme in the first quarter of 2011.
Fee-based model
IWAs are shifting to fee-based charging structures, to move into either the upper end of the mass affluent sector — typically individuals with £250,000 in net investable assets — or the high net worth sector, defined as those with £1m in net investable assets, the Scorpio research revealed. This, Dovey noted, revealed that the economics of the wealth management adviser model "is such that it is not truly viable for client business with assets below £250,000".
This point was made clear in another key finding in the survey, which was that advisers reported having seen their top line asset-based fee revenues decline to 100bps from 150 over the past two years to 36 months, and say they expect this trend to continue, with a drop to 75bps by 2013 to 2015.
Other findings in the Scorpio report:
- More than 80% of independent wealth advisers are in the final stages of converting their fee-based business model in anticipation of RDR
- There is a clear trend in favour of "goals-based wealth management", which takes account of both the investors’ financial assets and liabilities
- Almost 4% of advisers currently use multiple platforms to carry out their private client business, but all say they would prefer to employ a single common platform
- Firms seeking to increase business volume from the HNWs must upgrade their product capability to offer tax-efficient investments through SIPPs, insurance-linked investments and QROPS
Momentum Global Investmentment Management is a UK-based specialist investment manager concentrating on the UK and Asian HNW markets, and a part of the Johannesburg-listed Momentum Group.