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Larger adviser firms increasingly adopting centralised investment propositions

25 July 2018

The size of a client’s savings pot impacts their investment strategy, with wealthier clients plumping for model portfolios, according to new research by Aegon.

The research showed that for clients with less than £100,000, a sizeable 37.5% of their portfolio is placed in multi-asset funds and just 13.5% into in-house model portfolios. In contrast, clients with more than £200,000 have around 30% invested into in-house portfolios and just 15% in multi-asset funds.

The use of DFM portfolios followed the same pattern, with this strategy used for less than 10% of a below-£100,000 portfolio, but 14% among clients with £200,000 plus.

Aegon’s research showed the size of the firm also had an impact on the choice of investment strategy.  Firms with less than £5m in assets under advice (AUA) preferred multi-asset funds (41%), while in-house model portfolios accounted for just 1.2%. The reverse was found to be true for firms with in excess of £100m AUA, where multi-asset funds account for just 21.5% while in-house model portfolios make up 30% of assets.

The pension provider said the differing approaches were as a result of client needs, service costs and scale with simpler portfolios considered better suited for clients with smaller pots. Where larger firms have the resources and expertise to build their own centralised investment proposition, they are also increasingly developing their own portfolios for clients, the company said.

Nick Dixon, investment director, Aegon, commented: “The variation shown in our research highlights that, while firms of all sizes value reduced administration inherent in multi-asset funds, smaller firms are more comfortable delegating fund selection and asset allocation to external specialists. Larger sized firms are increasingly adopting centralised investment propositions which they can operate efficiently at scale, improving their client experience and raising overall fee revenue.”

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