Navigating the Process of
Outsourcing your Investment
Proposition
Geoff Balzano
CEO, Morningstar/OBSR
Brief for today’s workshop
Financial planners who do not want to outsource the investment
management function are using model portfolio solutions to provide
suitable investment advice to a range of client profiles. The session
will discuss how well this works in practice and identify the main
advantages and drawbacks for both clients and advisers
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The range of services available
DIFs - distributor influenced funds
In-house or out of house portfolio design
The due diligence process - assessing performance and service quality
Allocating clients to the appropriate portfolios
Fund selection strategies - active, passive or both
Model portfolios vs. discretionary fund managers and other solutions
Agenda
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The Outsourcing Decision
Outsourcing Options
Discussion: How to make the best decision
Criticality to competitive advantage
The Outsourcing Decision
High
Invest to perform
Perform and Develop
OR
OR
Outsource
Outsource
Outsource
Outsource
OR
Keep internal
Low
Your firm’s relative capability
High
A Case Study
The Investment Process
Strategic Asset Allocation
Customer Assessment
Tactical Asset Allocation
Fund/Security
Selection
Maintenance/Review
Portfolio Construction
Operational Platform
• Administration
• Reporting
• Dealing
• Tax Wrappers
Outsourcing Options
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Multi-Manager Funds
• Return-based
• Risk-based
Model Portfolios
Asset Class Models + Fund Panel/Select List
DFMs
Evaluating your options
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Break into 4 groups – Multi-Manager, Model Portfolios, A/A
+ Panels, DFM
Answer 5 questions:
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What are the pros and cons of outsourcing using your approach?
What type of adviser firms are ideally suited for your approach?
What type of consumers are ideally suited for your approach?
If you could ask an outsourced partner of your type just five due diligence
questions, what would they be?
What skills/responsibilities need to exist within the firm to support this
outsourcing option?