DFMs still grappling with regulatory overhauls

  • Learn about how DFMs are faring
  • Grasp the impact of new rules on the sector
  • Gain an understanding of what DFMs are focusing on

Other challenges lie ahead. The assets DFMs do run may soon be less lucrative than they once were, as intermediaries who use wealth firms look to pass on cost pressures. Both external research and this year’s survey results suggest Mifid-induced cost pressure is now feeding through from advisers to the broader financial services industry. In June, a survey by research company NextWealth suggested that advisers planned to exert cost pressure on the providers they used in response to Mifid II – despite their clients appearing less concerned about fees than they once were.

Of that survey’s respondents, a relatively low 34 per cent said they had noticed an increase in client queries as a result of new cost and charges disclosures. Yet two-thirds of these respondents said the disclosures would prompt changes to their business. Fifty per cent said they would push platforms for lower fees, with half saying they would demand the same of fund groups and only 9 per cent planning to offer a lower-cost service for clients. 

While the research did not reference wealth managers, it suggests that intermediaries are looking to mitigate cost pressure by passing it on to providers. Our survey suggests this is either already happening, or wealth firms are keen to pre-empt it by adjusting their fees. Several respondents have cited Mifid-induced cost pressure. In contrast to last year’s research, not a single respondent to the survey argued that the regulation is boosting the level of business they receive from advisers. 

One participant, Charles Stanley, believes the pressures are particularly acute given the concurrent increase in competition in the market.

“Mifid II cost pressures are of particular note for us at the moment,” the company says in its response. “The combination of cost disclosures through Mifid II and new propositions being brought to the market has meant that DFMs and their services are under increasing pressures, both in terms of their own costs and those of the underlying investment portfolios that they manage.”

Ups and downs

More notably, a look at Table 2 suggests that wealth firms are beginning to reassess their charges. But this has not been as simple as companies just cutting fees. A comparison with last year’s results suggests some names have reined in their charges for both model portfolio services and bespoke offerings. 7IM, whose stated bespoke charges ranged from 0.5 to 0.9 per cent in its 2018 submission, now lists a tiered charging structure running from 0.25 to zero per cent. Whitechurch, which cut its MPS fees in 2018 amid what director Robert Dyte described as “aggressive” price competition, lists lower bespoke charges this time round.


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What is Walker Crips MPS charge?

  2. Which of theese statements is true with regards toi firms' assets?

  3. The effect of what is described as "unlikely to abate"?

  4. Several firms are said to have complained about An inability to straightforwardly compare what?

  5. Some firms described the "agent as client" portfolio as what?

  6. Of those surveyed, how many firms expected their buylists to get larger?

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  • Grasp the impact of new rules on the sector
  • Gain an understanding of what DFMs are focusing on

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