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Delivering outcomes for the real world: Q&A with Schroders’ Gillian Hepburn

In this Q&A, IFA Magazine’s Sue Whitbread talks to Gillian Hepburn, Head of UK Intermediary Solutions at Schroders, about how the asset manager is establishing itself as a major contender in the low-cost model portfolio and multi-asset markets which it entered earlier this year.

IFA Magazine: outsourcing the investment management function has been a growing trend for advisers and planners for many years now. however, Schroders’ recent adviser pulse survey has highlighted that 20% of financial advisers have increased the amount of client assets that they outsource to an investment partner just in the last year. why do you think that is?

GH: I believe that the Covid-19 pandemic has changed a number of things.

Our Adviser Pulse survey specifically asked advisers why they were increasing outsourcing and we found that there were three key areas involved. These were around access to investment expertise, the ability to spend more time with their clients and finally effective volatility management. I see these three points as being inextricably linked.

If we unpack it a little, in the early part of the Covid-19 pandemic, stockmarkets plummeted. Advisers spent a lot of their time on client communication, trying to calm clients’ nerves and give them the information and confidence they needed to remain invested throughout such uncharted times. Of course, maximising the time spent with clients was really important to them. Although the markets consequently rebounded, advisers still said they felt a bit ‘spooked’ by the experience. I think this was a great word to use. They had to rely on asset managers to help them understand the complexities of what was happening and help them explain these things clients. The survey flagged up that they’re just not sure they want to do that again as it was really a challenge.

Our survey also told us that where advisers added the most value was in talking to their clients and helping them to understand what was going on rather than in the management of their money.

The area of investment expertise is also interesting. That’s because it relates to things like increasing regulatory requirements and pressures in terms of those advisers managing their own model portfolios. There’s also the whole piece around governance and oversight for example of investment committees which is very much on the increase. All of these requirements simply take advisers away from the core activity of maximising the time spent with clients and on client engagement.

You only need to look at the requirements around things like depreciation notices and transactions reporting. That was another area where if advisers had chosen to outsource and partner with investment managers then it simply gave them more time to focus directly on their clients and their needs.

Thirdly, and it’s an interesting one, we’re going back to investment expertise in a way. The survey highlighted advisers’ interest in ESG and sustainability requirements but that they are still on a journey in terms of learning about this important element. As a result, they were interested in outsourcing some of that to investment experts as they felt that they may be just weren’t there yet in terms of their own specialist knowledge, understanding and expertise.

So in that particular area, why not use experts like Schroders as we run a set of sustainable model portfolios, and can offer highly effective outsourced solutions in this specialist field.

Overall then, there were a number of things which came together and which led to advisers increasing the level of outsourcing which they did.

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