Morningstar flies the flag for DFMs
Discretionary fund management services are a viable way for advisers to increase productivity and efficiency, so it is no surprise that advisers are increasingly embracing them, Dan Kemp has said.
The chief investment officer for EMEA at Morningstar Investment Management said that DFMs help advisers avoid the suitability gaps that can creep in when they use a patchwork of different providers for each step in the investment process.
“Discretionary management has traditionally been the preserve of the wealthy. Our proposition democratises portfolio management by focusing the resources of a global investment management business into a comprehensive service offering open to all clients of advisers,” he said.
DFMs and model portfolios have been increasingly popular post-RDR.
Morningstar recently reached a two-year milestone since it launched its DFM proposition. With an emphasis on working closely with financial advisers, Morningstar’s managed portfolios combine asset allocation and fund manager selection, using the strength of its data and research proposition to meet a targeted range of investment objectives.
It has five risk-and-reward profiles – cautious, moderately cautious, moderate, moderately adventurous and adventurous.
Morningstar did not start from a benchmark when constructing and managing its portfolios, said Mr Kemp, who added: “We construct the best portfolio that we can, drawing on the research resources from across our global organisation. All portfolios are subject to clear guidelines and robust peer review, ensuring they reflect the best ideas of the organisation as well as the portfolio managers.”
Adviser View
Meera Hearnden, senior investment manager at Bristol-based Parmenion Capital Partners, said the DFM market has grown as advisers may not have the investment expertise.
Ms Hearnden said: “Advisers may lose an element of control but it will help them specialise in areas that can really help clients, such as IHT, and if investments is not an area of strength it makes sense to outsource.
“The Morningstar portfolios offer a sensible asset allocation, so I do see their merit and value to IFAs, but it is up to the adviser to establish if the risk gradings suit their clients or if they a need wider choice of risk-graded options.”
