Frequently Asked Questions


What is insourcing?

Rather than the usual process of transferring the responsibility for portfolio construction and management to a third party, insourcing is the purchase of external resource by the IFA firm to enable it to build and maintain its own internal investment proposition.

Why shouldn't IFAs just outsource to a multi-manager or DFM?

Many IFAs choose this route either through direct referral or through a DFM led Wrap facility. We believe that this process is inferior to insourcing as it adds an additional layer of cost onto each client and can also reduce the client perception of the value of the role of the IFA in their on-going relationship and bring into question the level of the IFAs on-going fee. Perhaps more importantly it does not reduce the responsibility of the IFA to ensure the suitability of the investment for their client. We also believe that outsourcing to a DFM could be a business risk as the introducing IFA is exposing their clients to other professional firms, many of whom will have competing services to the introducing IFA.

How can Assetfirst help IFAs improve their business model?

The assetfirst service was developed from the in-house investment proposition of IFA firm Provisio Limited. Using the exact same model portfolios, Provisio Limited was able to convert from a 3% initial/0.5% trail business model to a 1% initial/1% on-going adviser charging model. In March 2008 - when these model portfolios were introduced - Provisio Limited had recurring income of around 25% of turnover, by March 2011 that had increased to over 75%.

What investment strategy issues does RDR introduce for IFAs?

RDR has introduced the need to ensure suitability of any investment strategy in terms of risk and has introduced for the first time the notion of total transparency for clients. This means that not only must any investment proposition align with the firms chosen Attitude To Risk (ATR) questionnaire but it must also stand up to scrutiny form a cost point of view. Assetfirst's model portfolios are risk-graded and our tactical positions will never compromise the risk/reward integrity of a portfolio. In addition our use of passive investment vehicles means that the overall TER of each of our portfolios is extremely low at between 40-55bps.

Will clients pay any fees to assetfirst?

No. Assetfirst charges the IFA business a fixed monthly fee for the intellectual property with which to build and maintain the full range of model portfolios on the platform of their choice. We do not charge any additional fees directly to your clients. They will of course face the AMC/TER of the underlying funds (typically between 40-55bps), any wrap/product charges and any adviser charge that you might agree with them.

Why do you charge a fixed fee and not a percentage of AUM?

We do not manage client money and our service is contracted directly to the IFA business and not the end clients. It is therefore irrelevant to assetfirst what level of assets the IFA firm might apply to the model portfolios and more appropriate to charge a fee to the IFA firm which is dependent upon the number of RIs listed with the FSA. Our fees start at £500 +VAT per month for firms with 3 or fewer RIs. Our full fee scale is available by request.

How can Assetfirst save the IFA and the client money? How much can be saved?

We have found that by removing the investment management cost from the client and tactically managing portfolios of passive funds it is possible for IFAs to charge more for advice whilst still saving their clients' money over traditional investment management services. E.g. A £25k investment in the Jupiter Merlin Balanced Fund has a TER of 2.36% (source FE 01/07/2011) with 0.5% trail payable to the IFA. Using assetfirst and introducing a 1% adviser fee (in place of trail commission) on a typical Wrap (25bps) invested in the assetfirst Balanced Portfolio (42bps TER) would result in a total client charge of 1.67% - a saving of nearly 30% every year.

Why do you place asset allocation before security selection in portfolio construction?

There is a vast catalogue of research that backs up the fact that it is asset allocation not stock selection or market timing which is the main factor in the variability of investment returns. Assetfirst are firm believers in this theory and where possible we advocate the use of index tracking funds and ETFs to avoid the risk of the effectiveness of our asset allocation being diluted by the actions of any active fund managers. That said, it should be remembered that careful security selection is vitally important even within the passive investment universe and assetfirst are experts in this field.

Is Assetfirst unique in the market?

There are a handful of similar services available but as far as we are aware none that combine tactical asset allocation with passive investment stock selection assistance for a fixed monthly fee. RDR has brought client costs into sharp focus and assetfirst is one of the first firms to offer a credible solution to this issue.

How do IFAs sign up to Assetfirst?

Please call us on 01462 687371 or email to find out more.