Discretionary and retail move closer together

17 October 2014

Fraser Donaldson - Insight Analyst (Investments)

Not many of you would probably expect the words ‘discretionary investment management’ and ‘packaged solution’ to be used in the same sentence, or even paragraph. After all, it hasn't been long since, with a few rare exceptions, the discretionary world would have little to do with the advised retail space.

Much has changed. Discretionary management is now widely available through adviser platforms and retail tax wrappers. Indeed, a significant percentage of advisers would not select a tax wrapper for a client unless there was accessibility to discretionary investment and, in many cases, a specific discretionary manager.

Why alignment occurs

While discretionary management and retail products may still seem like different worlds to some, I share the view that investment (in this case discretionary) is really just the engine behind the tax wrappers, or what dictates success or failure in achieving client goals. Therefore, it's inevitable that these two worlds are becoming more closely aligned.

There are life companies that have asset management arms and discretionary subsidiaries. Some life companies run platforms.

There are platforms that are launching discretionary firms, and most platforms are offering a choice of retail tax wrappers from several life companies, fund managers and pensions administrators.

An evolving trend

With all in the industry now striving for simplicity and efficiency, we are probably only a small step away from seeing all encompassing packaged solutions: platform, defined tax wrappers and all run by a stated DFM.

Independent advisers may struggle to justify platform, DFM and tax wrapper all from the same group. However, it's a different story for restricted advisers, who may find this kind of package of interest, particularly if each element is under some governance of quality.

As a d2c offering it would certainly appeal and may be an option for those adviser legacy books that are no longer under advice.

Watch this space as we are already seeing the building blocks moving into place through corporate activity.

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