Advisers must be able to trust their discretionary fund manager as decisions that backfire could still be the advisers’ responsibility, experts say.
In the latest edition of Money Marketing’s series of live debates, MM Wired, gbi2 consulting director Graham Bentley, Signpost Financial Planning chartered financial planner Nigel McTear, Charles Stanley senior investment manager Will Walker-Arnott and investment manager Nicole Loudon discussed how advisers can stay client-focused when outsourcing investment management.
End-to-end solutions that help advisers get more face-to-face time with clients are increasingly popular, but advisers need to ensure they are not flippant choosing a DFM.
The panel agreed the adviser and DFM relationship is crucial to the success of the arrangement and its nature should be mapped out.
McTear said: “It’s less about outsourcing and more about looking at it as partnering. Its not just a technical decision because any complaints that come in from clients could 100 per cent rest with the adviser.”
Despite this, Walker-Arnott said advisers are not always open to close relationships with DFMs, encouraging them to work with their outsourced investment managers to get the best client outcomes.
He said: “Some intermediaries don’t feel comfortable with us talking to their clients and don’t have that trust. Using a DFM is better because there is transparency of fees and offerings can be built bespoke from scratch.”
DFMs may also want to be seen as more than an outsourced service, creating individual packages.
Loudon said: “We don’t want to be that body that relays a message, we want that client contact, especially if it is a difficult time for them. Model portfolios have their place, but bespoke services put things on an important individual level.”
Advisers and DFMs being on the same page when it comes to attitude to risk scoring, and how this is mapped to an investment decision, is also key, the panel added.
McTear said: “It’s essential the DFM owns the risk mapping process. It all needs to be one seamless service and there is no need to use a third-party risk-profiling tool and then the DFM as another third party.”
The fear that too much open communication will lead to a DFM poaching an intermediaries’ clients is often misjudged, Bentley added.
“If advisers are that worried their DFM is so desperate that they would take their clients, they need to really be looking at the quality of who they have chosen to work with.
“Part of suitability post-RDR is that contact between all parties is necessary.”
Walker-Arnott agreed: “We are not going to bite off the hand that feeds us for short-term gain.
“If a client has been through a hard time, they want to be able to speak directly to the DFM for reassurance because they know we are part of the process.”
Money Marketing will soon launch a one-stop shop for outsourced investment insight, research and analysis, The DFM Centre. If you’re a DFM or fund provider and want to be listed, contact Piers Johnson on firstname.lastname@example.org