Due diligence puts eight out of 10 advisers off being DIM

Due diligence puts eight out of 10 advisers off being DIM

Around two-thirds of financial advisers (64 per cent) believe it will be much harder to keep investment management in-house over the next two years, a survey shows.

Advisers polled by Investec Wealth & Investment said it will become increasingly difficult to provide an in-house investment management proposition due to growing complexities involved in delivering this service alongside their other responsibilities.

Research conducted among 107 intermediaries in December 2015 and January 2016 showed due diligence demands were cited by 82 per cent as the key reason why in-house management services will be harder to provide.

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The poll results came after the FCA’s thematic review of due diligence found many advisers did not show consistently good practice across all products and services.

Among the problems uncovered by the FCA were firms where staff felt unable to question the status quo, and where advisers considered that the service they received from a platform to be more important than the service their clients received.

The review also uncovered some advisers retro-fitting due diligence to justify their choices.

A third (34 per cent) of advisers polled by Investec said their time would be better spent looking after existing clients and developing new prospects rather than on discretionary investment management.

Nearly a quarter (23 per cent) feared trying to practice investment management internally would destabilise existing client relationships.

More than half (52 per cent) of advisers expect smaller intermediary businesses will turn to discretionary investment managers (DIMs).

When choosing which discretionary investment manager to partner, the most important criteria for advisers (cited by 82 per cent of respondents) are the quality of service and transparency of charges.

These were closely followed by the DIM’s investment performance, costs (both 79 per cent) and security of assets (78 per cent).

The top 10 most important criteria when choosing a Discretionary Investment Manager (DIM)


% cited by IFAs†

Quality of service


Transparency of charges


Investment performance


Costs (TERs)


Security of assets


Personal relationship/ trust


A willingness to work in partnership


Reporting capabilities (including Online Portfolios)


Research capabilities


Compliance (to be seen to use others to help with compliance)


Source: Investec Wealth & Investment (†either 'most important' or 'important')


Adviser View

Chris Daems, director of Cervello Financial Planning, said while the survey may be correct in assuming that it is increasingly difficult to provide in house investment management the reality is that instead many financial planners have a centralised investment proposition backed up by services.

He said this approach adds more client value including - but not exclusively including - cashflow planning.