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Max Nardulli unveils the three pillar relationship that will lead to sub-advisory success – providing value, product delivery and strategic partnerships and how to best deliver this.

As consumers become more and more sophisticated, and their relationship with UK financial services increasingly strained, it is down to the industry to seize the initiative and offer trustworthy products with choice and that cater for the varying needs of individuals, writes David Curtis.

Goldman Sachs Asset Management talks to Alan Durrant, chief investment officer of Skandia Investment Management, to find out more about the first steps in the due diligence process – an essential element in finding the right sub-advisory partner.

— Dambrine: France will peak in near future

As sub-advisory continues to sweep through Europe, France remains split between proponents and opponents to the trend. Geraud Dambrine discusses why this market is being seen as one of the hottest growth prospects.

“Outsourcing asset classes to external sub-advisors is a sign of weakness.” This is quite a bold statement, yet one which often dominates the mindset of some Continental European circles.

Research conducted by l’Agefi, in association with Goldman Sachs1, shows that in France the concept of outsourcing draws mixed reviews – not just in terms of what motivates institutions to outsource in the first place but also what factors are considered when choosing a sub-advisory partner.

— Phillips: UK is the leader

Outsourcing of asset management mandates to third parties has grown fast across Europe. Nick Phillips and Ingo Ahrens discuss the unique aspects of northern Europe and its responses to the trend.

An analysis of sub-advisory in northern European markets reveals a scenario in which different players in different countries are discussing outsourcing and implementing it through various models. In general terms, the region is a mature adopter of the sub-advisory process.

Alex Fletcher outlines the benefits of open architecture for insurers struggling to perform given complex market conditions.

Weak growth, higher distribution costs and more volatile fund volumes globally have contributed to rising European interest in the sub-advisory model,says Ingo Ahrens.

 The origins of open architecture across Europe can be traced back to the private banks serving the needs of Europe’s wealthy. It is accepted among private banks and their clients that having relationships with multiple providers makes good sense; as such private clients have long been exposed to multiple product providers and to sourcing specialist products from specialist providers. The family office is the ultimate and most sophisticated expression of this.

Insurance companies, universal banks and the smaller regional banks, are driving the trend to sub-advisory as they do not regard asset management to be their core competency, says Nick Phillips.

Many financial organisations are now looking at all aspects of their value proposition from a profitability, competitive and scalability perspective.

In Italy, where retail banks have strong brands, evaluation of the impact a partnership with a delegated manager could have on the commercial network is a high priority,says Max Nardulli.

Read the most recent writings of Europe’s foremost researchers and consultants and a common theme emerges – there is a new phenomenon sweeping Europe and it is called sub-advisory, outsourcing or white labelling. Behind this growth is the need for financial institutions to focus on their core competency – and become asset managers or asset gatherers, and find partners to help fill product or capability gaps.

With an increasingly regulated market and a growing awareness of the importance of reputation, the sub-advisory market is moving closer to the institutional manager selection model, says Nick Phillips.