The interest in financial advisers obtaining discretionary permissions appears to be on the slide – Nucleus census
In 2016, the wrap platform saw one in five respondents say they planned to hold discretionary permissions. However, this has now
dropped to one in ten in 2018, and the percentage that already hold these permissions has remained constant at 8%.
Meanwhile, for Nucleus users, in-house model portfolios continue to gather the largest proportion of client investments. This year,
45% of all users with in-house model portfolios will allocate over 80% of client monies into this solution, up from 34% in 2017.
Discretionary fund managers (DFMs) continue to polarise opinion among Nucleus users, with 22% of those that use them expecting
to increase their usage in the next year, and only 6% decrease. Interestingly, over the longer term, 43% of users say they won’t use a
DFM, about the same as those who say they will begin or increase using, while only 14% said they would decrease or stop using.
Nucleus surveys its users every year for its census, which is designed to both engage with its users and ensure the platform is
delivering what its clients need. Asking a series of questions about advisers’ businesses, clients, and their views on the industry, the
census helps advisers gauge their own progress, as well as tackle issues which might be keeping them up at night.
Barry Neilson, chief customer officer at Nucleus, said: “There has been continued rumblings in the market that adviser applications for
discretionary permissions was on the up, so it is perhaps surprising to find our users supposedly buck that trend. With so many
advisers still building their own in-house model portfolios, it is important that they realise the administrative burden this can have if
they operate these on an advisory basis.
“While one option could be to outsource these functions to a discretionary investment manager, we can see from the stats that not
all advisers are sold on the value add these partners can bring to a business. Whether an adviser is using one or has its own
permissions, they need to ensure that the necessary due diligence is carried out, and that the operational processes are robust,
consistent and provide the customer with the best service and outcomes as possible.
“Advisers risk tarnishing the reputations they have built up over a long period of time if they underestimate or don’t implement
either process carefully and effectively.”