The survey of 132 intermediaries conducted during April 2014, showed that two thirds of IFAs take overall responsibility for agreeing a client’s investment strategy, implying Investec says, that in most cases a DFM’s mandate covers only part of their overall portfolio.
And, while 97% of the advisers surveyed said they insist on remaining responsible for assessing the overall suitability of each client, only 17% said they also remain responsible for asset allocation decisions.
Investec said that according to the survey, advisers are embracing a variety of structures to underpin their working relationship with DFMs, often employ more than one
“45% of advisers use outsourcing agreements, 36% an adviser as agent and 35% favour Tripartite agreements,” Investec said.
According to the responses, the wealth manager added: “Regardless of how advisers prefer to structure their relationship with a DFM, the majority (84%) of IFAs use DFMs to reduce their potential exposure to regulatory risk.
“This study clearly shows that the needs of advisers and their clients are far from homogenous and DFMs have to adopt a flexible approach if they are to develop successful partnerships. This echoes our own experience of working with IFAs over many years,” Mark Stevens, head of intermediary services, Investec Wealth & Investment, said.
He added: “DFMs that take a ‘one size fits all’ approach to working with advisers ignore the often complex and varied requirements of their clients that is only properly exposed through providing suitability advice.”
According to Simon James of Gore Brown Investment Management, these changes reflect the continued evolution that has been taking place since the inception of RDR.
“In the beginning a lot of management involvement as there were a lot of issues to sort out. As they have become a little more confident about the various regulatory issues, so they are increasingly becoming more confident using more bespoke services," he said.
But, while IFAs are requiring more flexibility, more of them are making use of the services of DFMs.
According to Investec, 54% of advisers now outsource their client’s investment management to a DFM, an increase of 6% from 2012 when 48% did so.
