London & Capital believes discretionary fund management could be more suitable than funds of funds for adviser firms with several registered individuals.
The company, which has just launched a range of 10 risk-graded discretionary portfolios, says DFM promotes consistency in the advice process for firms with multiple RIs. It says because the adviser chooses a fund of funds, a client could potentially get 20 different recommendations from 20 advisers in the same firm, so the advice could depend on which adviser they see. This potential inconsistency is negated if the adviser firm outsources investment management to a DFM instead, it says.
London & Capital sees DFM as a way for IFAs to de-risk their business. It says advisers need to show awareness of asset classes and there are concerns about advisers having the expertise for investment management. Appointing someone to manage client portfolios on their behalf is an attractive option for many IFAs as it allows them to focus on other aspects of a client’s financial planning and bring in new business, which will be important after the retail distribution review.
Head of adviser solutions Bruce Ely-Johnston says: “If you put someone in to a multimanager fund, it is no different to other funds when there are extreme markets that all take a nosedive. It comes back to the adviser to make a decision what to do about it.
“Advisers have to write to clients, hope they respond and chase them up if necessary but if the client responds three weeks down the line, they may have missed the boat. What has gone on in the markets within the last two years has brought it home to advisers.”