Fund managers ‘ignoring’ wider adviser market

Fund managers have been disregarding a "grassroots adviser" distribution strategy and instead have been focusing largely on the "highest-value" advisers, according to Tria Investment Partners.

In its latest Trialogue article, Tria Investment Partners said there has been an increasing number of fund managers "targeting" a relatively small part of the market while "ignoring the rest".

"We now have an under-serviced segment of advisers – those who build discretionary portfolios for most of their clients," the article said.

"For those in the fortunate position of having a respectable performance track record, [managers] should take caution in disregarding a grassroots adviser distribution strategy – given the withdrawal of so many of [their] competitors from this part of the market, [they] might just find some clear airspace here," it said.

According to Tria, fund managers started focusing on "highest-value" advisers during the lower net flow environment post-2008.

"Many fund managers restructured retail distribution teams to shift the focus away from servicing individual advisers and towards 'head office' relationships," the article stated.

"The idea was that the centre of power had shifted from advisers constructing portfolios themselves to head office researchers who build model portfolios. It was logical, then, that most of those individual advisers wouldn't need direct servicing, and that BDM teams could be reduced in size."

According to research conducted by Tria, model portfolios only comprise 26 per cent of the cash flow of the IFA sector.

"In contrast, 49 per cent of flows were placed into discretionary portfolios built by the adviser (the remainder went into managed portfolios and multi-sector funds)," the article said. 

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