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Keep it simple, IFAs warned

Discretionary fund manager London & Capital says outsourcing to one wrap and one DFM may be the easier option for confused IFAs in the run-up to the RDR.

The firm, which provides a range of risk-graded model portfolios to IFAs, says there are many grey areas within the RDR proposals and that using a range of platforms and DFMs may complicate matters if the FSA provides more clarity further down the line.

It believes some advisers complicate things by trying to be all things to everyone but keeping things simple through one wrap and one DFM will be easier to adapt than several wraps and portfolios.

However, the firm warns that some traditional DFMs insist on lock-in periods for IFAs. London & Capital says advisers may want to avoid this type of arrangement as they could potentially lock clients into poorly performing investments.

Head of adviser solutions Bruce Ely-Johnston says: “Advisers know they have got to change but there are no clear-cut rules and regulations. A lot are finding it difficult but those who can make a decision are benefiting the most. If they take on one wrap and one DFM they have got a focus, which is good as long as they do not lock themselves in.

“By keeping it simple, it is easier to adapt if the FSA decides it likes or does not like something. Where advisers go for the option of several DFMs, the process will be longer and disjointed.”

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