Advisers are using discretionary fund managers too widely and for clients where they add little value, says Jelf Financial Planning managing director Glenn Thomas.
Speaking at the PIMS conference on board the Aurora last week, Thomas said he is “surprised” at how widely DFMs are used for standard portfolios.
He said: “DFMs absolutely fit into our investment proposition, but only in certain areas: high value clients, clients with complex affairs and Aim portfolios.
“But we have to be careful where we use them; I think they are used too widely.
“A lot of DFMs are competitors, so to use one for a standard client is to introduce a competitor where I would question if they are adding value. And does that seem a sensible way to run a business rather than use a model portfolio which is your brand?”
Thomas also warned where DFMs are adding little value, clients may begin to question why they are paying both the DFM and the adviser.
He said: “I think some financial advisers like the idea of having some expertise alongside them that probably they should possess themselves, for a standard portfolio.
“And I think that is a false crutch to lean on, because at some point the client is going to ask – if this firm is doing all the investment management, why am I paying you both?”