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Defaqto concern over IFAs taking DIY route

Defaqto is concerned that IFA firms setting up their own multi-manager funds may attract the same criticisms as broker funds in the 1980s and 1990s.

In the latest issue of the multi-manager guide, Blending Talents, principal consultant (investments) Fraser Donaldson says “DIY multi-manager” is providing new opportunities for some advisers.

Donaldson says IFA firms that have been running discretionary portfolio management services for years may find it more efficient to run these portfolios as Oeics but he warns that advisers could be put in a difficult position if their funds perform badly.

He says IFA multi-manager funds must prove their worth in terms of performance and hopes there will not be a repeat of the accusations of high charges and commissions which plagued broker funds.

Donaldson says: “When broker funds were popping up many years ago, there was not as much regulation as there is now. The charges worked out quite high because they were not managed on a retail basis and would get expensive if you did things such as fund switching.

“IFA funds are almost a reversal of what we are preaching about multi-manager. Someone will have to manage these funds, whether that is an IFA or a specialist manager, and that is going to add a bit of cost. We are waiting to see how they do.”

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