It seems financial advisers are often confused about the set-ups available when working with discretionary investment managers (DIMs). They are unsure of their options and the resulting obligations.
The ideal for nearly all advisers is an efficient partnership with a DIM who is responsible for all aspects of a service, leaving the adviser free to focus on the wider financial planning and client relationship management. But, there are two points worth raising in any discussion of an adviser/DIM selection process that deal with some fundamental misunderstandings that can arise.
The first is to explain to advisers that they are not ‘outsourcing’ the investment solution. At a recent seminar attended by almost 20 adviser firms, there was clear surprise when this was raised. The inevitable question, “If I am not outsourcing, what am I doing?” followed. The answer, “It depends”, is where the potential for a ‘suitability gap’ enters the equation.
In other words, if it is not clear to the adviser where responsibility for the various aspects of the relationship lies when working with a DIM, they are unlikely to have the necessary oversight required to manage those functions in a way that ensures clients’ portfolios are managed appropriately.