Does outsourcing to a discretionary fund manager (DFM) or discretionary investment manager (DIM) represent good value for money? It’s a good question to kick off a new year and one that resulted in rather unsurprising results when asked by Money Marketing magazine in December 2017.
The survey found that advisers are split over whether DFM fees represent good value for money with 42 per cent arguing they do not and 38 per cent saying they do, while a fifth are on the fence saying they are unsure.
Although the survey had just 100 respondents my personal feeling is the results would have been pretty similar if the poll had been among a much larger group.
The fact is what’s right for one adviser firm may not be right for another. The term ‘financial adviser’ covers all sorts of different types of businesses, from the incredibly highly qualified across the breadth of the financial landscape, to those with more general qualifications with some specialisms such as mortgages for example.
A firm that wants to offer investment options to clients but which has its main business focussed on mortgages and insurance will want to avoid the expense of bringing investments in-house, preferring to choose off-the-shelf managed portfolios and, as we’ve witnessed, quite often selecting a passive implementation.
On the other hand, a highly qualified financial planner may find that managing investments directly takes the focus off broader planning with clients, reducing the number of clients he or she can have on their books.
Alongside the myriad of financial advice firms there is also a vast difference among DFMs and DIMs. This is in terms of quality of service offered and provided, costs, intelligent technology and, of course, performance – all of which are aspects of the ‘value for money’ conundrum.
My own experience is that the adviser firms that benefit most from the services offered at PortfolioMetrix tend to be more focused on broad financial planning, working with us as a partner to provide tailored investment solutions that match the varied needs of their clients.
As someone who has been in the financial industry for around 30 years I feel qualified to conclude that there isn’t a single type of DFM or DIM that will suit everyone and I doubt there ever will be. However, there is something for everyone out there…it’s just a case of finding the right one.
If you’re an adviser who is considering outsourcing investment management (or maybe looking for a change to what you have), you may find that this paper about what to look for gives you some useful tips.