Selecting a discretionary fund manager (DFM) is a detailed process. In addition to the need to provide cost-effective services to your clients, any relationship established with a third party needs to be carefully handled.
Having a panel of DFMs at your disposal is a sensible way to start, but how do you narrow down the list?
1. Identify a list of DFMs. There are hundreds of wealth management firms in the UK. Defaqto and the Private Asset Managers guide are a good place to start, with both hosting extensive lists of DFMs. In addition, read the latest Money Management survey of discretionary fund managers to gain an idea of who offers what.
2. Decide on your filtering criteria to make a shortlist. Something as simple as minimum investment can help narrow the candidates – are you looking for DFMs to manage high-net-worth clients, or those lower down the asset scale? You might also want to consider whether they are available on platforms and if they feature on Sipp and offshore bond panels.
3. Contact the shortlist for specific information. A questionnaire format will make it easier to compare the DFMs you have selected. Decide on any further questions such as investment strategy, how the relationship is managed, costs etc. This stage will also give you a first insight into service levels for DFMs you have not previously worked with – are they prompt, accurate and helpful?
4. Filter again and meet with shortlisted DFMs. Here you can ask any further questions, establish whether a positive working relationship will be possible and assess whether they will be suitable for your client base.
5. Monitor and keep records of your panel. Establish a record-keeping process and monitoring process for your panel. This will help with reviews further down the line and will provide evidence to show the regulator if it comes knocking.
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