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Editor's comment: Are clients getting the best DFM deal?

Could you have done better with a different DFM? As IFAs demand greater transparency, the aim must be to get clients the best deal.

Editor's comment: Are clients getting the best DFM deal?

How well is your discretionary fund manager (DFM) performing? Delivering the returns required by the client’s financial plan? Good. Now ask yourself: how well is it doing compared with other DFMs? Could you have done better with a different provider?

One adviser we spoke to called selecting a DFM ‘a leap of faith’. (See our lead article published today: Picking a DFM is a 'leap of faith': IFAs demand reform).

In one of our latest features on outsourcing, an adviser describes the performance of his DFM, Seven Investment Management, as ‘satisfactory but not outstanding’. So why does he use 7IM? The IFA says he did not like the level of dealing charges and turnover at other DFMs, preferring 7IM’s ‘transparent’ methodology.

Its investment process allows him to manage investor expectations, he says, and 7IM seems to understand its role in the financial planning process. All good reasons, but the performance comparison with other DFMs is still missing.

(Actually, an online commenter today remarked that 7IM is 'totally transparent'. I am keen to hear what other advisers' experiences of various DFMs has been.) 

In its final report on the asset management market this year, the regulator said investors in retail funds might not be achieving value for money. It pointed out charges paid by investors were not always warranted by retail funds’ performance.

Yet advisers say it is much easier to compare retail fund performance than that of DFMs. And working out the charging options DFMs heap on top of the ongoing percentage fee makes keeping track of charges ‘a thankless task’.

The aim of the game has to be to get clients the best deal.

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ADVICE

How to demonstrate value to clients under Mifid II rules

How to demonstrate value to clients under Mifid II rules

Under Mifid II rules, advisers will have to disclose costs and charges in full, separated clearly on an annual basis, issuing each and every client with a comprehensive financial statement.

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