What DFMs will expect of advisers

She says this enables the client to be put into the most suitable portfolio for their needs.

Ms Wall says the DFM also expects the adviser and client to review their objectives, risk profile and time horizon for investment on an ongoing basis, so that the client remains in the most appropriate portfolio.

She says the relationship between advisers and the DFM firm is often nowadays a ‘partnership’ - and both parties need to make sure they deliver on their responsibilities for the client.

That is why today discretionary investment managers seek to develop close partnership arrangements with financial advisers, says Mark Stevens, head of intermediary services at Investec Wealth & Investment.

Mr Stevens says advisers should expect a DFM to agree with them the most appropriate service delivery for each client.

In most instances, Mr Stevens says the investment manager would prefer to attend joint meetings with the adviser and their clients as this offers a greater insight into the client’s needs, wants and aspirations.

While this assists the investment manager in the day-to-day management of the client’s portfolio, Mr Stevens says it is not a mandatory requirement. It is also likely to raise fears among some advisers of losing the direct client relationship, which would pose a threat to their business.

He says: “The discretionary investment manager should ensure that each client’s portfolio remains appropriate and is aligned to the mandate the adviser has agreed as suitable with the client.”

When a client has a regulated financial adviser who is responsible for financial strategy, Eric Clapton, chief executive of Wellian Investment Solutions, says a discretionary investment manager will be happy to rely on that adviser to provide the required ‘know your client’ information.

Mr Clapton says this more traditional set up means, rather than handling the client, the investment manager will agree with the financial adviser the suitability of the investment mandate for the beneficial owner.

The investment manager will also rely on the financial adviser to supply the required client verification, he adds.

Mr Clapton says a service level agreement should be put in place between client, investment manager and financial adviser, to ensure a clear understanding of where responsibilities lie and how the parties should interact is reached.

When model portfolios are hosted by retail platforms - the so-called ‘off-the-shelf’ typically risk-rated options favoured for more mainstream clients - Mr Clapton says the discretionary investment manager is much less likely to have a relationship with the underlying client.

As is the case when purchasing a multi-manager fund, Mr Clapton says the financial adviser will provide all required details to their client from paperwork provided by the investment manager.

In terms of scrutiny with the FCA’s current increasing focus on due diligence, Gareth Johnson, head of managed investment services at Brewin Dolphin, says DFMs will expect advisers to ‘kick the tyres’ and spend time getting to understand the proposition and the service offering.

This interrogation, at the start of the relationship is vital in ensuring the DFM is a good fit for the adviser and ultimately their clients, Mr Johnson says.