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Jelf: Advisers over-using DFMs for standard portfolios

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?”


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  1. I quite agree – that DFM’s are being over utilised. An adviser has to provide a clear reason for using these DFM’s, and there has to be a great service provided. For example a DFM who sits on client cash – rather than invest it – needs to be questioned by the adviser . .or as we call it Chasing the DFM – to ensure they carry out their obligations. It seems that with the increased costs of being authorised – perhaps the additional costs for Advice , needs to be ” justified “, and using a DFM creates such an illusion. It also has the effect of complicating, . . the business relationship – and the culture for blame when things go wrong. Whose fault is it ? Rather than service standards. For example one instance is with an appointed representative of Tenet Group . . .who the Compliance at Tenet refuse to engage , and withdraw completely – rather than deal with the issues. Secondly the Head of Compliance at Tenet, do not charge their appointed representative any fees, on the basis ” the business was put in place prior to 31 December 2012 . Tenet Compliance, permit their appointed representative to operate ( buy, sell, charge fees etc., ) without having met the clients ( and who refuses to meet with the clients ) has no Terms of Business, Terms of Engagement, No Fact Find, No Risk Profile – yet transfer business on their behalf – No Reasons Why letter ? No confirmation to confirm what he /she is doing or what he/she is charging – and may be transferred to the Stranded Life Platform ( or Aviva ) , under the contract Terms of Tenet Group ( owned by Standard Life Aviva Friends Life and Aegon ) . It is good to see Regulation and RDR is Working . . .in some places but not others ! Like DFM’s networks like Tenet – are merely conduits for offloading and dumping poor quality advice. A network is only as good as the worst member in it ( or as they say in Essex . . . In it ? ). It appears Tenet is the old Sage mortgage advisers network – so compliance may not be at its best ( or in my opinion mediocre . . . .such is the abysmal standards of Compliance at Tenet. In my opinion – there can be no substitute for good quality advice – regulated or unregulated . . . . we see the results of Banks advice ( and now Credit Suisse America – further interest rate fiddling ) – whilst many advisers are being unfairly targeted, and bullied by corrupt, inept and the most incompetent of individuals, and their employers and sponsors – such corrupt activities should be classed as wholly unacceptable. The problem is advisers who attempt to relinquish their duties by outsourcing is a dangerous game – and every good adviser keeps checks on these outsourced companies. That is only sensible. However the reason behind the issues is the way the Insurance market is controlled. Put simply it is one great big Pyramid Scam – with the man at the pinnacle divesting business down through the pyramid system . If the flunky at the bottom earns a penny , and every level of the pyramid system gets a penny – the costs are passed onto the client – who gets very little – in fact Ms F Adam is a good example. The problem for regulation is they wish to enter the market in the middle of the Pyramid – and generate their share, taking an addition slice . . . . Let the Buyer Beware .
    On top of this is the new and revised training costs, administration and consultancy costs – to assist an adviser through the myriad of complicated and unjust requirements – and the Governments ” restrictions of Trade “. Put simply it is no more than organised crime – and legalised payments to Government ( eventually ). Lie a tax scam several activities – which make tax and diverts money to those companies and individuals involved – which arrive at the same result – but generates significant amounts of money for the Few at the top of the Pyramid. Pyramid selling is the name of the insurance game – and its destruction is undermined by selfish incompetent – insurance companies.

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