“The starting point is to ask ‘who are our clients and what do they want’ and then you can develop a criteria of your own,” she says.
Watts’ firm started looking at outsourcing investment processes around three years ago and last year underwent a “huge” due diligence exercise to put together a panel of DFMs to fulfil the role.
The most important consideration for Watts was that the DFM could offer a service which was “repeatable across the whole business”.
Cost is, of course, “always a consideration” but the focus is more on the charging structure rather than the rate and the availability of the MPS via a platform is also important.
Defaqto’s ratings service had not launched when she was selecting her DFMs but she said she would look at it in the future if she was making any changes. Ultimately, however, she says “you can make anything look good if you use the right criteria and what Defaqto has classed as important might not necessarily be important to us”.
‘Fluffy stuff’
Treve Evans, founding partner of Evans Falco, a Cornwall-based chartered financial planner, agrees: “The responsiveness of a DFM to answer questions and provide information on a regular basis at the right level for our clients and access to someone within the organisation who can explain changes in portfolios as and when they are happening is very important to us.”
At any one time, Evans says the firm offers clients access to a traditional long only portfolio; an alternatives-focused, lower correlation portfolio; a passive solution and an ethical solution and for each of these he uses a different firm.
A practical consideration within the adviser community will be whether a DFM is hosted on the platform they have a long-established affinity wit. For the most part advisers will have had relationships with platforms for longer than with DFM’s and will have chosen to stick with the platform they can work with best.
Most-likely it will be a long-term partnership an adviser is looking for when it comes to outsourcing, so the ability to get on and work well together, which Fraser Donaldson from Defaqto terms the “fluffy stuff”, is the most important factor of all.
The full article on what’s adviser outsourcing to discretionaries will be
