Navigating the Process of Outsourcing your Investment Proposition

Geoff BalzanoCEO, 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

•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

• The Outsourcing Decision• Outsourcing Options• Discussion: How to make the best decision

The Outsourcing DecisionHigh

LowYour firm’s relative capability

High

Invest to perform

OR

Outsource

Perform and Develop

OR

Outsource

Outsource

Outsource

OR

Keep internal

A Case Study

The Investment Process

Operational Platform

• Administration • Reporting • Dealing • Tax Wrappers

Customer Assessment

Strategic Asset Allocation

Tactical Asset Allocation

Fund/SecuritySelection

Portfolio Construction

Maintenance/Review

Outsourcing Options

• Multi-Manager Funds• Return-based

• Risk-based

• Model Portfolios

• Asset Class Models + Fund Panel/Select List

• DFMs

Evaluating your options

• Break into 4 groups – Multi-Manager, Model Portfolios, A/A + Panels, DFM

• Answer 5 questions:• 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?