The majority of advisers are looking to increase their use of model portfolios and risk-rated funds as a result of the Retail Distribution Review (RDR), according to research from Skandia Investment Group*.

The research showed that nearly two thirds (65%) of advisers are planning to increase their use of model portfolios following the implementation of the RDR. Over half (53%) of advisers are also looking to increase their use of risk rated funds which have grown in popularity.

Other packaged investment solutions which advisers are looking to use more of as a result of the RDR include multi-asset funds and multi-manager funds, with 44% and 42% of advisers respectively planning to use these investment solutions more. Interestingly, just a third (35%) of advisers are looking to increase their usage of bespoke portfolios after the RDR.

While cost remains an important consideration for advisers and the industry in the build up to RDR and beyond, the research revealed that over half of the advisers (57%) do not feel the need to adopt a lower-cost strategy and seek cheaper funds for clients due to the regulatory changes.

Of the advisers who did feel the need to adopt a lower-cost strategy and were looking for cheaper investment solutions, the most popular fund option was low cost actively managed funds, with two thirds (66%) of advisers considering this as an option. This was followed by passive funds which half (51%) of advisers were considering as a solution. Just 19% of advisers were considering ETFs as a low cost fund option, suggesting that ETFs remain a niche low cost option with limited demand.

Ryan Hughes, portfolio manager at Skandia Investment Group, said: "With the implementation of the RDR fast approaching we are seeing a shift in the investment solutions that advisers are looking to recommend. Our research suggests that we will see a significant increase in advisers using model portfolios and packaged solutions such as risk rated funds, multi-manager funds and multi-asset funds, indicating that these solutions will meet the needs of the majority of investors. In addition, we are seeing that advisers are looking to place less emphasis on using traditional solutions such as bespoke portfolios of funds after the RDR.

"It is also encouraging to see that whilst there is ongoing pressure to drive down cost in the industry, the majority of advisers don't feel the need to adopt a lower-cost strategy by looking for cheaper investment solutions, which suggest that meeting customers' investment needs remains paramount rather than cost."

*source: Skandia's Q1 Adviser Confidence Barometer, completed by nearly 1,000 financial advisers
**source: Skandia Investment Group.  Correct as at 29th February 2012.