InvestmentsMay 3 2013

Take 5: Using DFM model portfolios

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ByAimee Steen

Accessing a discretionary fund manager (DFM) directly is neither cost-efficient nor desirable for some clients. But utilising their expertise might be.

A DFM model portfolio is one option for clients who would benefit from some added management but do not need a full bespoke service. Find out what to look out for with our guide to using DFM model portfolios.

1. Check to see if the model portfolio is on a platform. Using a model on a platform you already use will provide easier access. However, only considering those on your existing platform may not be in the client’s best interests; you may need to go off-platform or use another.

2. Consider how your risk-profiling tallies with the model portfolio provider’s rankings. Many model portfolios are risk-profiled, but it is your responsibility to assess your client and ensure you choose the right option.

3. See whether existing client assets be transferred into the model portfolio. If not, it will be necessary to consider how existing holdings might conflict with asset allocation in the model portfolio.

4. Analyse your client’s tax position. Depending on their circumstances, it may be more appropriate to be in a model portfolio, a full DFM solution or even a unitised model portfolio.

5. Decide if the added costs are justified by the benefits. Using a DFM model portfolio rather than a solution you could design yourself, or even a multi-asset fund, must add value for it to be worthwhile.

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