Investments  

‘Shocking’ suitability risk in model portfolio panacea

“They would need to employ someone who does that for a living.”

Yet in its latest paper on due diligence from February, the regulator stated: “We found all firms, regardless of size or type, can carry out good research and due diligence. We saw examples of small firms, including those with a single adviser, carrying out robust research and due diligence.”

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However it said it remained “disappointed” by some of the due diligence it found.

Tom Hawkins, Old Mutual Wealth’s head of proposition, admitted the industry needed to raise standards, but it was improving the “quality of reporting and transparency, which facilitates efficient and effective comparison and analysis”.

Mark Pittaccio, head of intermediary distribution at Charles Stanley, said: “Transparency is crucial for Charles Stanley in our dealings with financial advisers.”

Jason Dewar, a senior consultant on Distribution Technology’s asset and risk modelling team, said the lack of a consistent reporting standards meant asset managers only release what they think is important.

“It is quite common to see differences in the way underlying holdings, asset allocations, and charges are presented.”

Discretionary fund manager Brooks Macdonald declined to comment while Brewin Dolphin and Seven Investment Management were asked to comment but did not respond.

Richard Ross, director of Norwich-based Chadwicks, said his firm doesn’t use DFMs, but that “a single DFM using a range of risk-rated models is appropriate for lower value portfolios in accumulation where the portfolio represents a large proportion of overall investable wealth”.

“It becomes progressively less suitable for clients with a range of financial assets (such as a DB pension fund) and for clients in decumulation I cannot easily see how the risks can be managed within a simplistic risk-rated model portfolio.”