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Nearly 650 advisers gain discretionary investment permissions

FCA logo glass 620x430Nearly 650 advisers were granted a discretionary investment permission in the past five years, according to FCA data.

A Freedom of Information Act request by Money Marketing has revealed that 645 advisers who still held advising permissions were now also allowed to manage investments.

Those firms can manage authorised and unauthorised alternative investment funds, as well as Ucits funds.

Fewer firms looked to gain advice permission compared to the advisers looking to move towards discretionary business.

Over the same period the FCA received 475 new authorisations for advisory permissions, refusing just two.

Feature: Should IFAs get discretionary permissions?

The FCA notes firms are allowed to have various permissions at the same time, and those that wanted to change or add to their regulated activities could apply for a ‘variation of permission’.

In a survey of 120 readers on the Money Marketing website in August, 43 per cent said advisers should have discretionary permissions, 40 per cent said they should not, and 17 per cent remained undecided.

Many discretionary managers have reported increased inflows and portfolio sizes in recent years.

Platforum research last month showed that around 16 per cent of advice firms had discretionary permissions. These tended to be larger firms.

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. A personal view only of this, is that obtaining these permissions is probably born of trying to cut out a layer of cost in order to be able to charge fees of 1% or more so overall because its all now in-house.

    This will likely be achieved by splitting the fee between the two company elements required, with “company” charging for the financial planning, and the other for fund management. This means VAT, so we end up at, say, 1.2% where the adviser/fund management combo amounts to 1%.

    Using largely tracking funds can make this not too bad from an all-in cost perspective by its self compared to a “normal” DFM proposition, but in most cases, there is likely to still be some form of investment platform cost to factor in – certainly I’d imagine this to be the case for the smaller advisory firms doing this at least – so we are still up at around 1.75% to 2% per annum minimum; hardly bargain basement, but then again, that’s possibly not the modus operandi, is it.

    In many cases, therefore,I’ll wager this will come down to a bunch of model portfolios based on a risk assessment process, the only difference from a conventional advisory practice being that you don’t need client permissions to amend the portfolio each time you do so, unless the risk profile has changed, and that’s about it.

    Is this REALLY what’s meant by a DFM proposition, when low cost risk-targeted/mapped multi asset funds are out there and largely similar to what would come from such a scenario, but for one hell of a lot less (i.e. from as little as 0.35% or so per annum aside from the adviser charge)?

    If that IS what this largely turns out to be, then:

    (a) It sounds very pricey to me for what it is, and:

    (b) If so, then before too much longer, we could
    be looking at the next can of worms waiting to
    be opened, with suitable reparations to be
    funded by all of us. Again.

    Hope I’m terribly wrong.

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