g
your discretion
Until now, advisers have baulked at outsourcing to
discretionary managers due to the perceived high
costs of doing so. But this could prove a false economy
productivity, profitability
and the long-term value of
their business.”
l The cost factor
One reason advisers may
not have turned to discretionary
managers has been
the idea that costs are prohibitive,
but according to
Gurr fees are becoming
increasingly reasonable.
Then there is the fact that
some product providers,
international life companies
for instance, offer discretionary
management as
a service wrapped within
offshore bonds.
And ironically, Gurr
notes that discretionary
management is becoming
cheaper, while fees
for advisory mandates
are rising. He says:
“Traditionally, discretionary
management has been
seen as the expensive end
of the market but that is
changing. Costs are going
up on the advisory side
as it becomes more apparent
that this is in fact very
labour intensive.
“If a client is based overseas,
it can be difficult to
get hold of them to consult
them over every investment
decision you want to
make. Sometimes, investments
need to be switched
quickly and having a discretionary
approach is the
best way of achieving this.
“In fact, a number of
organisations in the past
few months have asked
advisory clients with smaller
portfolios to transfer to
other providers because
they do not see running
them as cost effective.”
l Third-party choice
David Austin, Cazenove’s
head of private client finan-
getting DiY right
BY HELEN BURGGRAF
cial planning, says working
with third-party advisers
can have many side benefits
in addition to the core
service being used.
“Most of our clients
will have third-party advisers,
be they lawyers,
accountants or other financial
advisers or wealth
managers, but they may
require some of the specialist
expertise we can
provide,” he says.
Special report profeSSional ServiceS
Kevin Mudd is the first to admit that DIY is not for everyone.
Mudd, whose company helps financial advisers, wealth managers and high net worth individuals to
conceive, launch and run their own Luxembourg-based Sicavs, says there are some financial advisers who,
possibly because they work for themselves or in small firms, feel fund management is best outsourced to
a specialist. But there are many others who would benefit from the speed, efficiency and financial savings
they stand to gain from managing their own investment funds, he says.
Typically these would be advisers who work for large firms, “who have been making investment
decisions for clients for some years, and actually have a knack for it and a penchant towards it, and
who probably need to step more in that direction,” notes Mudd, one of the founders of KMG Sicav-SIF,
the Luxembourg-based DIY fund provider.
Such advisers would also tend to have well-informed investors
as clients, which, in Luxembourg, technically means individuals with
€125,000 or more to invest, or those whose intermediaries have
certified that they are well informed.
“Their attitude is, ‘We know what our clients want, and we want
to be able to control the costs and how much the client pays, whether
that be for an asset manager, or administrative [tasks], or the buying
and the selling of contracts,’” Mudd explains. “They want to take
control of what their client can invest in, and to strip out whole levels
of administration that are involved in the process currently.”
Funds launched by KMG on behalf of its clients are actually sub-
funds, in the Specialised Investment Funds category, a Luxembourg
Mudd: ‘controlling costs’ format that is designed to be particularly flexible, and which can be
marketed in almost any jurisdiction in the world.
KMG charges clients a flat €40,250 (including VAT) to set up a fund, which is refunded immediately
once the fund is up and running; it is paid back to KMG in instalments over five years out of the fund itself.
A 1% annual fee is also paid out of the fund to be split between KMG and the service providers, to keep it
running on the platform.
MAy 2009 [www.international-adviser.com] INTERNATIONAL ADVISER
33
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