Poaching clients goes against everything a discretionary fund manager stands for and would be “commercial suicide”, DFMs told FTAdviser in response to accusations that those with financial planning arms would steal clients.
The risk was raised last week by Morningstar.co.uk editor Emma Wall, who told FTAdviser that advisers should be careful when outsourcing specialist investment function via discretionary managers, as some firms also have financial planning arms looking for clients.
Canaccord Genuity Wealth Management is one such DFM with an advisory arm, but chief executive David Esfandi was adamant that this would not occur.
“Not only should there be a high level of trust and professional integrity – there are usually legal contracts in place to prevent such activity.
“Advisers have a key part to play in the client relationship and DFMs are wise to respect the other two parties and in doing so preserve their valued business relationships,” he said.
Paul Miles, head of intermediary partnerships at IPS Capital, said that while the firm does not have an adviser arm, it still works with external advisers in offering a bespoke portfolio service.
“Our Managed Portfolio Service is only available via platforms and we work on the basis of the financial adviser acts as agent of the client and therefore have no contact with clients.
“Interestingly, there is a distinct lack of understanding in this area of contracts and responsibilities.”
He pointed out that in this set-up there is no chance of the DFM poaching the client, “as that would be commercial suicide”, adding that if the financial adviser is concerned about the potential for poaching, the firm is prepared to issue a legalised letter of comfort.
Chris Macdonald, chief executive of Brooks Macdonald, told FTAdviser that the firm’s business model is completely built on working with intermediaries, so as well as the potential reputational risks, “this would affect client referrals going forward”.
Bill Vasilieff, chief executive of platform Novia, which recently set up its own DFM, Copia Capital Management, confirmed that while in the past advisers used to hand the client over and get paid by the DFM, poaching risk has now decreased as on platforms there is no chance of seeing who the clients are.
“We say to IFAs that while we hold custody of the assets, they are in control of the clients.”
John Morton, executive chairman of European Wealth Management Group, told FTAdviser that to allay adviser fears, his business splits the financial planning and investment management functions.
“I think the problem is more relevant on bespoke portfolios than through platforms, because the latter can’t see any client information. We’re the same, we just manage money and have no direct contact with the client.
“Where it becomes a greater risk is where there’s an individual portfolio being introduced by a financial planner - but it should be no different to working alongside a solicitor or accountant - you can’t stop clients doing what they want to do, some of it has to be put down to the rough and smooth of this industry.”
David Cowell, director for Myddleton Croft Investment Managers, said that his firm gave up its permissions on the advent of RDR and instead set up to purely be the investment management arm of IFAs. “As far as I’m aware there’s only one other DFM which operates on a similar basis, but it works well for us.”
Malcolm Coury, founder and managing director of Money Wise IFA, said that while they use discretionary managers, poaching has not been a problem, something he suspects may be down to the size of the firm.
“I can easily see how a poaching situation might arise if the IFA firm is small or the adviser isn’t high calibre. The poaching could quite easily arrive as a result of the client having more confidence in the DFM than the adviser, i.e. the client has initiated it.
“As a rule we don’t normally let the DFM meet the client any way, we manage the client relationship, which obviously still further reduces any risk to our firm.
“An IFA worth his salt shouldn’t need to introduce the client directly in most cases - the DFM is supposed to manage the money, not the client relationship!”
peter.walker@ft.com
