Financial advisers are prioritising cost over risk profiles when selecting between fund of funds and managed portfolio services, according to new research.
- 30% of advisers focus on the higher fees associated with funds of funds, despite the option of diversified portfolios.
- Client risk profiles are a primary consideration for just over a quarter of advisers in the decision-making process.
- A mere 24% of advisers prioritise performance when choosing between investment options.
- Only 22% consider client preference for transparency and control as central to their choice.
In a recent study conducted by Downing Fund Managers, it has been observed that financial advisers overwhelmingly prioritise cost when deciding between fund of funds (FoFs) and managed portfolio services (MPS). Despite the potential for broader diversification and suitability for clients with lower risk profiles offered by funds of funds, around 30% of advisers remain focused on the associated higher fees.
The research further reveals that client risk profiles hold sway in the deliberations of only slightly more than a quarter of advisers. This indicates a significant underrepresentation of risk consideration in the advisers’ selection criteria when juxtaposed with cost.
Performance metrics, which are crucial indicators of an investment’s potential return, are surprisingly not a priority for the majority. With only 24% of advisers placing performance at the forefront of their decision-making, it highlights a striking trend where cost factors overshadow other critical elements that could potentially enhance client portfolios.
Transparency and control, often vital for clients who wish to have clearer insight and regulatory oversight of their investments, are given primary importance by a mere 22% of the advisers surveyed. This minimal percentage underscores a tendency among advisers to undervalue the importance of client preferences for transparency in favour of cost-related concerns.
Ultimately, the research underscores a prevailing trend where cost is the prime determinant in financial advisers’ fund selection processes.
