In order to run a better and more profitable business, advisers have been using DFMs to allow them to focus more time and energy on other parts of financial planning rather than the administration needed for creating model portfolios for a client.
Earlier this year, Defaqto’s annual research into DFMs showed that of the 45 per cent of advisers that are outsourcing, 51 per cent use DFMs.
And as adviser interest has increased, the discretionary fund management space has changed dramatically. It is now more available to advisers and the market has become more transparent. But the amount of DFMs available can still make it difficult to choose which is the best.
Since the RDR, there has been a lot of discussion and speculation around how the use of DFMs would continue and increase. This survey looks into the state of the DFM market and whether or not it is still holding up.
This is the second Money Management DFM survey, and despite targeting more than 60 DFMs, just 18 responded, with many citing time issues for not completing the survey, even though it was sent out with a lot of notice and deadline extensions were available.
Notable absences include Charles Stanley, which said it would not be returning the survey because it no longer fits into its business model and the information would end up looking skewed. Rathbones said it was not able to complete the survey in time and both Myddleton Croft and Wells Capital have made the decision to no longer take part in any surveys.
Active engagement
While the number of respondents represents just a percentage of the DFMs available, it narrows the list of those DFMs who are actively engaging with advisers and wish to provide information to the community.
Table 1 looks into the core details of DFMs participating in the survey, including assets under management, how many clients they have and the average assets per client.
The size of the companies differ greatly, but of the respondents, GAM has the greatest total assets under management with £78.9bn, with no externally advised clients. The company does have links to a range of IFA firms, networks and providers but cannot disclose the number in each category.
The second largest firm is Brewin Dolphin, which has £28.7bn assets under management – again, mainly in direct rather than externally advised clients.
The smallest company is Octopus, which reported £3.5m in assets, but did not specify the split between advised or direct clients. Both Parmenion and Whitechurch Securities said they conduct DFM business exclusively through advisers, but for the rest there is a split between both.
