Posts Tagged ‘UK’

Choosing an ‘outsourced’ investment solution

February 18th, 2015

Over the past couple of years, financial adviser resources have been squeezed to the extent that a number have decided to look to outsourcing solutions for investments for some clients. There are two main reasons for this trend.Outsourcing71

One is that, post-RDR, new research and compliance requirements have increased and at the same time product providers have come up with an increasing number of products, often more complex solutions.

Add to this the increased cost needed in terms of governance and regulatory compliance, and it can be cheap and arguably safer to outsource the investment function to a third-party specialist.

When advisory firms consider outsourcing their investment propositions, they can look at a number of options, such as multi-asset funds and discretionary solutions, and even multi-asset funds with a discretionary service attached to it.

In some cases they are seeking a ‘centralised’, or standardised, solution for lower-value clients to manage risk cost-effectively; in others a more bespoke solution is being sought that caters to the needs of higher-net worth customers.

The main reason for choosing a multi-asset over a discretionary solution is that multi-asset funds usually require much lower minimum investment sizes, often £1,000 or less, and fees are generally better expressed.

Beyond this, there can be other, more subtle differences between the two, so much so the lines between the two could be said to be blurring.

If an adviser decides to ‘outsource’ to a multi-asset fund they need to be confident that it does what it says on the tin
A flexible solution

The idea behind investing in a collective is that investor monies are pooled together and everyone benefits from the same investment portfolio. This very simple notion is at the heart of making sure that each client segment has basically the same portfolio and that investment decisions are applied consistently and at the same time.

Pooled monies often give investors access to solutions that require larger minimum commitments than an individual of the investor group would have been able to afford – and the manager of the pool typically has more power to negotiate costs and fees, which are then shared out among the investors.

Multi-asset funds give advisers an outsourcing solution that can be deployed across a variety of client segments, with multiple charging points, enabling ring-fencing of assets and providing access to a compensation scheme.

Of course, if an adviser decides to ‘outsource’ to a multi-asset fund they need to be confident that it does what it says on the tin. In other words, adviser cannot choose a fund for its name or managers’ reputation alone, they need to do detailed due diligence and see whether the fund has delivered on its promise.

Empirically, this means delivering on the stated investment mandate. Consideration should be given to the cost structure as charges can be higher with multi-asset funds. Picking multi-manager funds, which adds a best-of-breed sub-advisory element to the proposition, also comes with an extra layer of charges.

Researching funds

Historically, differentiation between funds was difficult. Charges were the same, areas of investment focus and style were similar; performance or return invariably became the main filter.

Nowadays, as client desired outcome, attitude to risk and capacity for loss can vary significantly, providers have come up with a wide range of funds to help advisers provide suitable solutions for their various client segments. This has left advisers with the huge task to pick solutions for their clients from a complex universe.

This infographic gives advisers a starting point in their research process. It defines the landscape and helps you map out a way to client solutions. To further help, Defaqto and other research agencies provide ratings services, which group together criteria we believe are important for the particular grouping.

We segment funds in many different ways, including whether they are return-focused or risk-targeted, multi-manager or direct (single-manager). A direct fund is where one fund manager or team manages all the investments in the fund, while with multi-manager funds different fund managers are used for different asset classes.

Funds are further categorised into predominantly active or passive, based around the Investment Association sector they’re part of in the case of return-focused, and by asset class in the case of passive funds. Passive funds include both traditional funds (Oeics/UTs) and the more recent exchange-traded funds or ETFs.

We believe that this level of granularity in the research process is necessary to build up a complete picture and compare like with like.

What the infographic visualises is that multi-asset funds come in various shapes and sizes. With over 500 UK-authorised funds available, comprising nearly 2,000 share classes, the landscape certainly offers plenty of choice.

To give this more context, the Investment Association recently announced their post-RDR methodology for nominating primary share classes. Where multiple share classes of a fund exist, the intention is to take the unbundled share class that has the highest charge but that’s free of any rebates or intermediary commission. The share class must also be freely available through retail third-party distributors.

At the end of 2012 many RDR share classes were launched, which makes it impossible to compare performance prior to the launch date unless synthetic performance history is added. The Investment Association has said that post-RDR share classes are to take the track record of pre-RDR bundled retail share classes.

The orange parts in the infographic show the areas we at Defaqto currently rate as part of our independent Star and Diamond Ratings. Given what we’ve just said about outsourcing, it probably won’t surprise you that it’s the multi-asset (and discretionary) areas we cover at the moment rather than single-asset and specialist.

Investment styles

Within the multi-asset space, we’ve identified two different styles: risk-targeted and return-focused.

Risk-targeted funds operate within strict risk bands, typically ranges of volatility, while return-focused funds aim to achieve outperformance, either absolute or relative to a peer group or benchmark – and typically with some risk control. Risk-targeted funds exist as families, with the same team and process behind each fund in the family.

Some of the individual funds within return-focused can also be viewed together as risk-focused families. These families are defined by having a similar management team and process, in some cases even the same team and process. They are set up to follow indirect rather than direct risk targets.

Some of the risk-targeted and risk-focused fund ranges are also unitised discretionary fund families – unitised discretionary fund management or unitised DFM.

Discretionary fund management or DFM (with the exception of unitised DFM) tends to be delivered to the client in two forms.

Firstly, there is the client-specific solution (usually known as bespoke DFM) which can provide a more individual service and investment approach designed for the individual client. This service also tends to focus more on the service aspects, for example including more detailed, perhaps on a face-to-face basis with an investment manager. Charges and minimum investments tend to be significantly higher.

Perhaps more familiar to the adviser is the second type of DFM, known as managed portfolio services. In this case, discretionary managers construct a series of portfolios that they believe will appeal to significant client segments and manage the portfolios according to their own mandates. It is up to the adviser to recommend the more suitable portfolio for the clients’ needs and risk appetite.

Similar to fund structures, all clients in a managed portfolio service solution will have the same portfolio. It is an off-the-shelf solution, so in theory, charges should be lower than for bespoke portfolios. Minimum investments could be as low as £20,000.

Advisers need to keep costs to the client in mind, though. These managed portfolio services portfolios are segregated, which means transactions are subject to potential capital gains tax, and the majority of portfolios are made up of collective investment schemes, so there could be additional charges.

To provide advisers with more resources to help them stay on top of the multi-asset universe, Defaqto has teamed up with the Institute of Financial Planning (IFP). The first document we have produced together, the multi-asset funds factsheet, can now be downloaded here. Rather than being an academic discussion of the universe, these factsheets provide advisers with a practical guide to each type of solution.

Maintaining an up-to-date list of suitable funds

Once suitable funds have been selected, the job is far from done for the adviser. They need to ensure that the solutions they originally selected remain roughly the same over time; the proposition needs to continue to match the original client mandate. If any of the solutions change and the adviser needs to make adjustments, they should already have other solutions ready and researched so that they can offer them in the original solutions’ place.

It’s also important to remember that it’s not just the solutions that can change. Client requirements can evolve as clients get older, their circumstances change or they may have a different attitude to risk or capacity for loss. Advisers should check on an ongoing basis whether changes on the client side need to be reflected in the investment portfolio.


Value of IT outsourcing deals in the UK up 15%

February 16th, 2015

The total value of IT outsourcing contracts agreed in the UK last year rose 15% on 2013 figures, according to new research.Outsourcing70

IT outsourcing (ITO) contracts agreed in 2014 totalled £3.44 billion in value, with nearly a third of that value accounted for by deals struck in the energy and utilities sector.

Those deals were worth £1.05bn and accounted for most of the 187% year-on-year rise in the sector on £373 million spent on all outsourcing deals in the sector in 2013.
The figures were revealed by BPO provider arvato in its UK Outsourcing Index for 2014. The data was based on information complied by outsourcing analysts NelsonHall.

According to the report, the UK’s outsourcing market was worth £6.65bn in 2014, with £3.1bn of contracts agreed business process outsourcing (BPO) deals. Contracts worth £109 million were agreed representing a mix of ITO and BPO arrangements.

“The most in-demand ITO services were multi-scope infrastructure management, with £899 million of spend, application management, worth a combined £772 million and network management contracts totalling £485 million,” arvato said.

The report revealed that public sector outsourcing contracts agreed in the UK last year had a total value of £2.49bn and that just 8% of all outsourcing deals in the public and private sectors signed by UK-based organisations in 2014 “involved work being delivered entirely offshore”.

Debra Maxwell, managing director of arvato UK, said: “Outsourcing has mistakenly become synonymous with offshoring, yet our research demonstrates that UK delivery is continuing to play a fundamental role in the industry as customer requirements become more sophisticated.”

“Offshoring will always have a role to play in meeting certain business’ needs but the demand for more sophisticated solutions, combined with salary inflation in traditional offshore locations, means UK-based delivery is set to continue to dominate,” she said.

The report also highlighted changes in the way that customer relationship management functions are being delivered by organisations. More than 60% of third parties delivering these services now provide “multi-channel” services, up from 40% in 2013.

NelsonHall said. “Whereas relatively recently contact centre outsourcing contracts in the UK were typically for voice only services, in 2014 it was the norm for customer management services contracts to be multi-channel in nature, with email, web chat, and even social media support commonplace. This was true across both the private and public sectors, with the e-government initiative ensuring that all local government customer services contracts announced were widely multi-channel in nature.”

In the financial services sector there was a rise in the number of outsourcing contracts entered into for platform-based services. In 2013, a quarter of all UK outsourcing contracts in the sector were for platform-based services, but this rose to 40% last year, according to the report. New outsourcing deals agreed in the sector in 2014 had a total value of £1.1bn, making it “the most active private sector”, it said.


Time for IT jobs to be set aside for women

January 27th, 2015

With women accounting for only a fraction of people studying computer science, there have been calls for gender-related quotas for IT roles.
With new figures showing little change in the number of women studying computer science, one industry expert is saying it’s time for radical new measures to address the problem.Outsourcing58

Gillian Arnold, head of the women’s section of UK professional computing body BCS, said from her personal point of view firms should be obliged to employ women in a proportion of IT-related roles.

Her comments follow figures showing only 3,125 women chose to study computer science-related subjects in the UK this academic year, compared with 2,925 the year before, according to university admissions organisation UCAS.

More than six times as many men chose to study computer science, with 20,460 undergraduates this year. The numbers of male computer science university students also grew faster, up from 18,785 the year before. The gender gap is similar in the US, with only 20 percent of computer science degrees earned by women.

Overall, however, women outnumbered men on two-thirds of degree courses, with 57,800 more women gaining higher education places through UCAS than men.

Arnold, chairwoman of BCSWomen and founder of an IT services company, said progress in addressing the shortfall has been slow, stressing initiatives to get women interested in technical roles had been taking place for decades.

“Collectively, all the woman’s groups I’m aware of have been doing this work since the mid-1990s, certainly. Think about the collective hours of effort that have gone into trying to encourage women to join these professions. That’s an enormous amount. We haven’t issued any quotas but maybe it’s time,” she said, stressing this was her personal opinion rather than that of BCSWomen.

“Where have we got role models who say, ‘It’s cool to be a technical woman?’. There are so very few of them. If we could fix that, I think that would be a huge change. Personally, I would like to see quotas but I recognise not everybody feels that way.”

Once a critical mass of women work in IT-related fields, the gap between the sexes could close naturally, she said.

“There’s an academic in the states, Virginia Valian, who said once you’ve got about 30 percent [of women in a type of role], it becomes a self-sustaining figure. You see the women then bringing other women into the workplace, and it becomes a more attractive field to work in,” she said.

Schemes such as e-skills UK Computer Clubs for Girls (CC4G) also have an important role to play, she said, in showing girls a side to IT beyond negative stereotypes.

“The TV image of someone in IT is The IT Crowd and that’s not brilliant is it? The other image is some geeky bloke in the middle of the night with a half-eaten pizza, who doesn’t appear to have washed in a month, so what girl aspires to be that?” she said.

Dr Sue Black, who served as a role model in the BCS women in IT campaign, agreed there is a need for more figures to inspire girls to join the IT industry, but believes progress is being made.

“It’s a shame that the numbers of people studying computer science are not going up dramatically and especially that the number of women is so low,” she said.

“On the plus side, the number of women is higher than it has been since 2007, so that shows a trend upwards which is good news.

“Everyone is gradually waking up to the fact that we need diversity at all levels of the tech industry if we want to compete in what is now a global marketplace.”

Despite the sluggish growth, she believes people are less resistant to schemes trying to encourage more women to work in IT than they once were.

“The attitude towards diversity has changed dramatically in the past few years. When I set up BCSWomen in 2001, an online network for women in tech, many people, men and women, complained to me that it was ridiculous and sexist having a group to support and encourage women in tech [asking], ‘What about the men?’.

“Thankfully, attitudes are changing and there are lots of necessary and valuable initiatives now, not just BCSWomen, encouraging and supporting women and girls in tech.

“The change in attitude and all these initiatives working together will make a difference, but Rome wasn’t built in a day. These things take time.”


Outsourcing nations turn hot for UK freelancers

October 7th, 2014

The number of UK freelancers selling their skills to clients based in countries regarded as outsourcing hubs, like India and China, has leapt by 234 per cent, an e-marketplace says.Outsourcing53

In the last year alone, the number of short term projects for firms based in East Asia, Eastern Europe, India, Pakistan and the Middle East has more than doubled, said PeoplePerHour.

Japan is the biggest end-client, as over the period there has been an eight-fold surge in the stock of UK freelancers registered with the website who have an invoiced a business there.

The last year also saw a four-fold increase in the number of UK freelancers invoicing businesses in India, and about a three-fold increase in the numbers invoicing firms in China.

Pointing to India, PeoplePerHour said the nation’s small businesses and start-ups were “booming,” explaining why such nascent firms were inwardly investing in their own growth.

This move by Indian entrepreneurs to expand their own businesses appears to be eclipsing their traditional focus – “offering support to help western businesses grow,” the site said.

But it explained: “For these businesses to grow, there is a greater need to find people with specialist skills; skills such as business planning, design and copywriting, that are in short supply amongst the local workforce.

“Now with greater financial support/investment behind them, businesses have the resources to look beyond the local labour market, and find global talent that matches their development needs.”

The sub-text is that firms in the East are turning to freelancers and micro businesses in the West because, while such European firms cannot compete on costs, they are skills-rich.

“This burgeoning freelance marketplace, which enables UK professionals with specialist skills to export their talents, could radically change the way businesses operate in the future,” said PeoplePerHour’s founder Xenios Thrasyvoulou.

He added: “Thanks to the evolution of the online marketplace, this pool of highly skilled freelance professionals are now in a position to sell their skills to businesses across the globe.”


Intelligent Office UK expands shared services offering in Glasgow

September 10th, 2014

Intelligent office UK, outsourced service provider of onshore business process outsourcing (BPO) solutions is planning to open its second onshore shared services centre in Glasgow.outsourcing42

The new centre will provide document production, document conversion and digital transcription services to law firms throughout the UK. It will also create over 100 full-time positions adding to its 700 work force.

Clients of Intelligent office UK include Stephenson Harwood, Wragge & Co, Bevan Brittan and Farrer & Co.


Home Office to pay sacked IT provider £224 million

August 22nd, 2014

The IT supplier, Raytheon Systems, sacked by the Home Office in 2010 for failing to meet targets, has been awarded £224 million.Outsourcing3

The amount consists of £50 million for damages, £9.6 million for disputed contract changes, £126 million for assets acquired through the contract and interest of £38 million.

It is reported that the eBorder programme was worth £750 million and when terminated is had cost the taxpayer £259.3 million including £195 million in supplier costs. The programme tracked passengers entering and leaving the UK, plus checked against police, security and immigration watch lists. According to Theresa May, it would have cost the government an extra £97 million had the contract not been terminated.


TCS’ Diligenta secures deal with UK-based Friends Life

August 20th, 2014

Tata Consultancy Services (TCS)’s British business process outsourcing subsidiary, Diligenta, on Tuesday announced a new multi-million pound and a multi-year contract with UK-based Friends Life Management Services for its international operations.Outsourcing50

In a notification to the stock exchange, the country’s leading information technology services, consulting and business solutions company said Diligenta would configure and implement TCS BaNCS, a globally acclaimed core platform, to support the international operations of Friends Life—Friends Provident International.

However, financials of the deal were not disclosed by TCS.

With the help of TCS BaNCS platform, Friends Provident International will be able to deliver seamless services to its customers spread over Asia Pacific and West Asian region, said the notification.

“This new deal will enable us to streamline our systems, improve services to our customers and put us in a strong position to continue growing new business,” the notice quoted John Van Der Wielen, CEO International at Friends Life as saying.
Diligenta’s track record of successfully migrating over 6 million Life and Pensions policies on to our industry-leading platform solution TCS BaNCS, contributed directly to this win,” said Suresh Menon, CEO at Diligenta.

Friends Life is not a new client for Diligenta. In 2011, the TCS subsidiary had taken over the IT and customer services functions of the UK business of Friends Life for 15 years.

The deal worth $2.2 billion was one of the largest deals TCS had won through an organic route then.


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