The principal of research firm CoreData said the trend among advisers to outsource to discretionary fund managers since the retail distribution review meant there was increasing pressure on discretionary fund managers to take a tough line on underlying performance.
A poll of 100 discretionary fund managers carried out by CoreData found the average discretionary fund manager would tolerate 10 months of underperformance before replacing a manager, while 50 per cent said they would ring the changes after just six months.
Performance closely followed “perceived trustworthiness” as the most sought-after traits in a fund manager, cited by 89 per cent and 92 per cent of the discretionary fund managers respectively.
The survey also revealed that 30 per cent said the most important factor when selecting a fund manager was track record.
Mr Phillips said: “This research shows that despite the increasing focus on costs, discretionary fund managers still view a manager’s track record as the key factor in selection.
“However the honeymoon period is a short one, with discretionary fund managers displaying their ruthless streak by not tolerating any prolonged period of underperformance.”
He added that the figures also revealed there was added pressure on fund managers whose style was out of fashion as discretionary fund managers were unlikely to give them the time to come back into favour and make up for any potential losses.
Stuart Fowler, founder of London-based financial planner and wealth manager Fowler Drew, said: “This is ridiculous as it’s extremely difficult to derive any significant information from performance alone, even over a number of years.
“When you read that discretionary fund managers must give clients appropriate benchmarks to evaluate performance, it’s rubbish. It assumes you can do it by industry comparison, but you need extraordinary level of research to draw sensible conclusions.”