Leigh believes that the discretionary marketplace will undergo considerable changes as providers and advisers alike adapt to RDR requirements.
“Will DFMs expand in relation to the market? They’ll either keep their costs the same but increase the amount of money you need to invest, or they will put up your costs," he says.
"I think the market will expand to start with and then contract as the implications of that become clear. The smaller IFAs will be caught out by that".
He suggests that a sales-led culture means that discretionaries are not providing a comprehensive service to advisers: "they aren’t explaining the broader DFM market. They are out there selling service, but it’s bigger than that”.
Leigh insists, however, that London & Capital is "not going to be in a position where we have to increase our cost base”. The firm charges 25bps for its discretionary managed portfolios.
Those portfolios have the ability to move 100% into cash if need be, a flexibility appreciated by IFAs, according to Leigh. The least cautious of the ten portfolios – Managed Portfolio 10 – currently holds 30% in cash, a position that Neil Michael, executive director of investment strategies at L&C, expects to maintain for at least another month, given current levels of uncertainty and the imminent end of QE2.
Currently accessible via Novia, Transact and Praemium, L&C expects its managed portfolios to be available on three further platforms next month. Leigh believes that some larger financial players, including big insurance houses, are “sitting on the sidelines and seeing who’ll survive” in the platform space, before making their move via an acquisition or other activity.
It is the IFA, however, that is inevitably his focus. “IFAs have been overpromised and underdelivered to over the years”, he says.
Leigh sees problems arising from the loss of knowledge materialising as a result of those who will not requalify in the run up to RDR. Yet he remains confident in the resolve of the industry. “Some IFAs can tend to put things back and back, and their backs are against the wall at the moment. But that is when they tend to do well”.
