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Defaqto guide helps advisers choose DFM

Defaqto has published Letting Go, a guide to help advisers select a discretionary fund manager.

Defaqto says interest in DFMs among advisers is growing. In February, the firm surveyed 127 adviser platform users to find out if they outsourced their investment process and found 19 per cent outsourced to a DFM.

Defaqto says choosing a DFM is likely to be daunting for advisers compared with choosing a multi-manager in Defaqto’s view because the portfolio managers will be unknown. The type of information that is available on multi-manager funds, such as cost and past performance, will also be difficult to access for DFMs or may not exist.

Defaqto says many DFMs will find it difficult to point to specific examples of past performance because portfolios are often managed differently.

Wealthy clients with at least £250,000 to invest can access a fully bespoke service that can invest in all assets and provide a high level of personal service. For a minimum investment of about £50,000, it is possible to access a similar service restricted to funds and long-only investment strategies.

Hybrid services can be provided for a minimum investment of £20,000, comprising one or more off-the-shelf portfolios with different risk and reward profiles. But some of the more personal elements offered by bespoke services, such as face-to-face meetings with the manager, will not be provided.

Defaqto suggests that advisers who want to gain an understanding of past performance for DFMs should ask the managers how a similar existing portfolio has performed against its benchmark over various periods.


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