I’ve said it before and I’ll say it again; it’s a good time to be a discretionary fund manager. Provided, that is, you stay modern and relevant.
We’re at a stage where some think demand for DFMs has peaked; all those life planners who wanted to make the switch to outsourcing investments post-RDR have already done so, and those advisers that want control over both mandate and costs aren’t budging any time soon.
But as our latest research project for the Money Marketing DFM Centre shows, the picture is a bit more nuanced than that.
DFMs of all shapes and sizes are still reporting double-digit growth in assets and revenues.
In even better news, despite increased competition, profit margins and staff numbers have also held up across DFM land.
That’s not to say there aren’t headwinds. No DFM can really seem to make an in-house financial planning arm work, for instance.
The move to passive might not play into some old-school managers’ hands either.
I’ve certainly been around DFM offices that I can only describe as traditional, from the artwork and furnishing to the choice of high-end lifestyle magazines on display.
I, as a millennial, can’t help thinking about the eye-watering cost of these well-ordained premises before I even consider what the firm has to offer.
But getting to grips with what advisers and clients want is not an insurmountable challenge.
There has been innovation in blended model portfolios for those wanting a bit more passive exposure.
As advice firms are getting more scale, DFMs are showing a willingness to work with them on segregated mandates run specifically on their behalf.
However, the one key evolution that will separate those DFMs that can continue to report healthy financials from the rest of the pack will be adapting to client needs in retirement.
Rather than every DFM under the sun simply claiming that they are more bespoke than the other bespokes, they know advisers best, or (cringe) they can generate the most outperformance, some are actually starting to move from a world of servicing centralised investment propositions to one where centralised retirement propositions are front and centre.
The vast majority of advisers I speak to see the issue of how to get sustainable levels of income in volatile markets, while their client bases live healthier for longer, as one that cuts to the very heart of financial planning today.
In an increasingly crowded space, DFMs will have to show they can play a key role in solving that challenge if they want to keep on their soaring trajectory.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1