Adviser control concerns prompt James Hay ‘DFM light’ launch
James Hay Partnership is to launch a new ‘light’ discretionary fund management offering on its platform, in response to demands from financial advisers for a service which does not require control of client assets to be relinquished to the investment manager.
The new proposition does not currently have a launch date, but the firm said it would be rolled out in the next few months.
It will have much lower charges than those common in the DFM space, with an additional fee for the service are just 0.3 per cent, on top of platform fee of 0.18 per cent. The typical discretionary fund manager model on James Hay charges 1 per cent, plus platform charges.
Marketing director of the firm, Chris Smeaton, said: “What we are offering is what we call ‘DFM light’, which is a halfway house between an IFA managing funds on their platform and building models. The other extreme is completely outsourcing your investment admin to a DFM and the money leaves the platform.”
He explained that in a traditional DFM model, the client possibly has to have a relationship directly with the investment manager, rather than the client relationship remaining solely with the adviser.
“What we’ve designed is something which sits somewhere in between the two, so the discretionary manager manages the model on our platform... and the IFA chooses which discretionary manager model they want to pick from and allocates a certain amount of that money for the customer into that model.
“That model is therefore managed by the discretionary fund manager but the money is still maintained on the platform so they can still be viewed and monitored and reported on by the IFA and the client maintains their relationship with the IFA.”
Concerns over client relationship control are often cited as one reason for DFM use post-RDR being much less prominent than most had believed, as predictions abounded of a surge to outsource and remove investment liabilities.
Research compiled by FTAdviser last year found that 16.3 per cent of 10,558 advisers said they did ‘outsource’ investments, up only slightly from 14.8 per cent of more than 14,000 advisers that said they did so in early 2013.
The number of advisers who use outsourcing for “some” clients had increased from 14.7 per cent to 17.1 per cent since the turn of 2014, while the number of advisers who state they do not outsource at all remained at 66.6 per cent.
Mr Smeaton added: “The two main drivers [for IFAs to use the product] are they can maintain control of the models, but can outsource the investment decisions to a third party and can keep the cost effectiveness solution at the same time.
The firm has a panel of discretionary managers and said in the next few weeks it will be able to confirm the “first wave” of managers and that it expects there to be six managers on that panel.
ruth.gillbe@ft.com
