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Five DFMs target adviser due diligence in new taskforce

DFM Alliance members - February 2017
From left to right: David Miller (Quilter Cheviot), Mark Stevens (Investec W&I), Lucie Gordon (Brewin Dolphin), James Goward (Rathbones), Andrew Denham-Davis (Brooks Macdonald).

Five UK discretionary fund management firms have joined forces to educate advisers on DFMs due diligence.

The DFM Alliance, which will start free continuing professional development conferences in June across the UK, is made of representatives from Brewin Dolphin, Brooks Macdonald, Investec Wealth & Investment, Quilter Cheviot and Rathbones.

The firms collectively manage over £130bn assets.

The group says advisers need “greater clarity” around the concept of outsourcing, its benefits and what constitutes best practice.

Brewin Dolphin senior business development manager Lucie Gordon says while “outsourcing to a DFM may not be the right solution for everyone”, and that it is a “huge” burden for IFAs, the DFM Alliance would give them “information they need to make this decision.”

Investec Wealth & Investment head of intermediary services Mark Stevens says: “The formation of the DFM Alliance will help address the changing role of the adviser in recent years. Clients are looking for broader, holistic advice and are more amenable to the adviser outsourcing in order to gain access to a greater level of investment expertise.

“Managing investments is a full time job, particularly at a time when it is harder to make good returns with appropriate levels of risk.”

The main aims of the DFM Alliance are:

  • Educating advisers on the benefits of outsourcing investment management;
  • Providing a knowledge base for advisers to draw upon when undertaking DFM due diligence;
  • Working collaboratively with advisers to assist in improving business practices for the benefit of the end client;
  • Debunking the myths around working with a DFM and what it means for advisory businesses


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. If we define what Asset Allocation from a planner perspective the factors that should be considered to meet client’s financial objective are investment time frame and risk they are prepared to accept when investing their capital

    What is helpful, is establishing financial objectives in terms which are measurable, i.e. money. They become quantitative rather than qualitative. By dealing with numbers rather than feelings it becomes easier to demonstrate to clients what are the chances of their objectives can be or are being met. That is the benefit of a long term cash flow planning it gives the client a better understanding and make better informed decisions about their wealth can After 25 years’ experience using cash flows the number 1 priority for all my clients is ensuring they maintain their life style closely followed by ensuring they never run out of money

    The question I asked myself a number of years ago, was bearing in mind that academic research over the year that has demonstrated that the Asset Allocation is one of the pre-determine factors in investment performance Why then is the planner and the investment committee(post RDR) not control of all aspects of the asset allocation With the technology at hand today The adviser can easily see how models performed in the past and how given number of factors could perform in the future

    Yet every time a DFM firm has spoken to me recently they asked what risk profile tool I use and then told me with great pride their models are mapped with that companies

    Risk Profiling is just part of three stage process of helping client get better understanding of investing Regardless of what Risk profile tool you use it purpose is to assists help both client and adviser/ planner to explore (The client) past experience their future expectation from investing capital Final by asking question that require immediate answers help both obtain an understanding for capacity for loss or expected returns Once that has been established you can use this as a frame work to deliver an asset allocation model that then should be tested and demonstrated using the cash flow model

    Once that has established fund selection to meet the asset allocation This can be done in house or outsourced and is a separate discussion with the client , as is investment style (passive or active)

    May be the first aim of this alliance should be for the DFM to be more open about asset allocation and demonstrate to adviser their Asset Allocation process instead banging on about risk mapping to models and fund performance and the other four points described above

    May be the regulators on this one are so not behind the curve as many of us perceive them to be

  2. The one thing the DFM’s seem to constantly shy away from asked, is justifying why their annual charge is more than most advisers, but without taking any regulatory responsibility, servicing responsibility and don’t even have the cost of finding the client in the first place.
    Finally, it is interesting to ask them what they charge for a COP case in comparison with a normal retail client, given that they undertake more or less the exact same investment process.
    I have dealt with DFM’s since the late 90’s and I was even one myself, but we now cannot justify the cost for the liability we retain on outsourced clients to DFM’s. So until DFM’s decided to accept more responsibility and charge less for the services , we will continue to recommend alternatives to DFM outsourced propositions.

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