Advisers should not fear that discretionary managers are going to poach their clients as this is not a “commercial reality”, but they must ensure that they control the client relationship to avoid clients jumping ship of their own accord, accordintg to Verbatim Asset Management
Speaking to FTAdviser Dan Russell, head of sales at the firm, the financial planning and portfolio management arm of SimplyBiz, said that there is fear among some advisers that they may struggle to retain clients as a result of new rules enforcing higher transparency in remuneration agreements between clients, advisers and discretionary managers.
Mr Russell dismissed the notion of DFMs stealing clients, stating that it is not a “commercial reality” but did warn that if the adviser does not build up “astute planning” then it can leave them vulnerable to the client leaving them for the DFM.
He said: “What can happen is that clients can make a value judgement and they may decide to dispense with the adviser and stick with the investment services of the DFM if the adviser is not building up their proposition.”
According to Mr Russell, the FSA’s statement banning kick-backs from DFMs highlighted some of the “long-standing problems” of the DFM-adviser relationship.
He said: “Going forward, commercial relationships will be clear as there will be a fee to the adviser and a fee to the DFM for what they do - there will be no blurring of the lines now.
“Advisers are rightly wary of how the DFM will ensure a client’s portfolio remains within acceptable risk parameters for their client, as the adviser is responsible for ensuring the suitability of all products and services recommended. And of course, cost is an issue – both minimum investment levels, ongoing management costs and exactly who pays what to whom.”
Mr Russell believes the best route any adviser using a DFM can take post-RDR is to ensure that they offer a service that keeps the adviser in control of the client relationship, acting as a conduit to the services of a selection of managers who will run portfolios to strict risk mandates.
He said: “Clients can make a judgement call but advisers need to own the clients and show the services that advisers can offer where they are not just buying an end product.”
Earlier this year, SimplyBiz announced that it was to launch a new discretionary fund management service under the Verbatim umbrella that will be designed so that the firm is not provided access to any details of the underlying clients to ease switching between managers.
