Advisers agree they remain accountable for investment governance when outsourcing

The majority of financial advisers agree that they remain accountable for investment governance despite the shift towards outsourced portfolio management, a study for Raymond James has found.

The research, conducted by Owen James, showed that 78 per cent of advisers felt accountable for investment governance even when using a managed portfolio service (MPS).

Raymond James said this highlighted the continuing responsibilities firms retain after outsourcing portfolio management.

Almost half (45 per cent) of advisers had experienced either a slight or no meaningful reduction in workload after outsourcing investment management.

Raymond James’ white paper, The Long Game: Why Partnership is the New Source of Differentiation, noted that outsourcing often changed the nature of responsibility, rather than eliminating it.

Firms were spending more time on oversight, governance, provider due diligence, and client communication.

The survey indicated that advisers were placing greater value on the support, accessibility and expertise surrounding an investment proposition as outsourcing becomes more established, rather than solely focusing on investment performance.

Responsibilities were found to be increasingly shifting away from portfolio construction and fund selection towards provider oversight, due diligence and ongoing client engagement.

The white paper concluded that successful outsourcing relationships depended not just on investment capability, but also on the strength of the partnership between provider and adviser firm.

"Outsourcing investment management can deliver significant benefits, but responsibility for client outcomes ultimately remains with the financial adviser,” commented director of business development, Tom Hawkins.

"The findings reinforce the fact that advisers continue to play a central role in governance, oversight and suitability. While portfolio management may be delegated, accountability cannot.

"As a result, financial advisers increasingly value providers that do more than manage investments. They want partners who can support governance requirements, help navigate periods of market volatility and provide the expertise needed to support client conversations."

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