Choosing to use a specialist firm to manage clients’ investments is not an easy decision for many advisers. As Chartered Financial Planner, Lee Fisher, outlines in a recent article, his firm spent 18 months agonising over it but now the only regret he has is that they didn’t do it sooner.
Lee talks about the ‘outsourcing’ process but it’s much better (and more technically correct – but that’s a topic for another blog) to think about it as ‘in-sourcing’. Outsourcing implies handing over control to an external firm when the reality is that control remains very much with the adviser, particularly with the way we work.
Looking at what Lee says and overlaying our own experience, here are four reasons why working with a DFM/DIM makes good sense for advisers looking to grow their business in 2021:
- Addressing inefficiencies
Running successful advisory investment portfolios involves huge amounts of paperwork for advisers and gaining client approvals for every change is burdensome for both advisers and clients. Using a specialist investment manager means clients only sign up once to agreeing to changes and the rest is done for them (and advisers) with the minimum of fuss.
- De-risking
It’s important for advisers to understand the difference between Agent as Client and Agent of the Client, or Reliance on Others as it’s also known. Working with an investment manager under a Reliance on Others basis ensures advisers are clear about where risks sit and can ensure their PI insurance provider has confidence that they are not unknowingly exposed to additional risks.
- Better client service
As well as removing the burden of having to approve any change to a portfolio, using an investment firm that has the ability to deliver portfolios that are customised to individual client needs, rather than relying on MPS which inevitably leads to some shoehorning, is definitely better for clients. It’s also better for advisers, as the next point illustrates…
- Compliance
Shoehorning clients into MPS portfolios is something the FCA is very concerned about and the PRODregulations are in place to ensure advisers don’t do this. However, it’s hard for advisers managing investments under an advisory model to avoid falling into the shoehorning trap. Bringing a specialist investment management firm into the team can give advisers peace of mind they are not going to fall foul of the regulator.
There are many other benefits for advisers by working with the right discretionary investment manager. If you’d like to find out more, please get in touch with me at info@portfoliometrix.co.uk.
