We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

In association with

Home > Opinion > FTAdviser Blog > Jenna Voigt's blogs


Few answers from FSA on outsourcing via DFMs

FSA’s “centralised investment proposition” guidance raises more queries than it answers.

By Jenna Voigt | Published Jul 09, 2012 | comments

In its long awaited guidance on “centralised investment propositions” (Cips) – IFAs’ primary means of outsourcing their clients’ investments – the FSA last week confirmed that a three-way agreement does not always have to exist when advisers outsource their clients’ investments to a discretionary fund manager (DFM).

In cases where an adviser has agreed to act as the client’s agent, the client does not have to form a direct contractual agreement with the DFM, the FSA said. However, the adviser must explain that it is outsourcing their clients’ investments to a DFM, and that this arrangement will leave the adviser as a customer of the DFM – not the adviser’s client.

The issue sounds legalistic and even arcane – like much of financial regulation, in fact. However, advisers have raised concerns in the past that a direct relationship between DFMs and clients could lead to business walking out the door. Their fear is that clients will either cut the adviser out and deal direct with the DFM or with the DFM’s own advisory arm. The clarification last week would appear to solve that problem.

But advisers also last week told Investment Adviser that the FSA’s final guidance still leaves questions unanswered. Most significantly, if the client has an agreement with their adviser, but not the DFM, it becomes unclear who the client or the regulator can hold responsible for what might happen if their DFM investments go wrong.

Additionally, the final guidance comes without clear examples of what happens to clients’ money in the event that a client chooses to change adviser, or if an adviser was to go bankrupt. In the scenario above, the client would not be a customer of the DFM – the adviser would be. To what extent could the client control what happens to their money under those circumstances?

Although the consultation is supposedly over, the FSA needs to provide further clarification on how this arrangement can work. As it stands, its finalised guidance raises more questions than it answers.

Jenna Voigt is news reporter at Investment Adviser


Our Columnists

Hal Austin

Hal is editor of Financial Adviser and has been for more than a decade. He has previously worked on a number of local and national publications.

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

Most Popular
More on FTAdviser
FTA jobs