Navigating the Process of Outsourcing your Investment Proposition Geoff Balzano CEO, 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 Decision Criticality to competitive advantage High Low Your firm’s relative capability High Invest to perform OR Outsource Perform and Develop OR 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/Security Selection 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?