How to evaluate a DFM from top to bottom


  • Regulatory filings and accounts

Again, listed companies will have a little more transparency in this respect. Accounts would be viewed over several years to understand any emerging trends within the business.

What is the profitability of the business?

What is the trend in revenue and earnings over the years?

Where the DFM is part of a larger entity, what is the size of the revenue segment attributed to the DFM? And is that growing or shrinking?

What level of autonomy do they have?

Where is the capex focussed? Are they investing sufficiently in their people, systems, infrastructure, and client servicing functions?


How strong is the balance sheet, what is the outstanding debt and when will it mature/need refinancing?

Pillar 3 disclosures are now readily available for most companies, listed or not. Are they maintaining adequate regulatory capital? Looking at the trend in revenue and earnings is it likely they can continue to do so?

How is the business growing, organically, via acquisition or both and is it sustainable?

How do other ratings agencies view the firm? Is the debt rated by credit agencies and if so, what is the current rating for both the firm and outstanding issues and how has that evolved over time?


Statements from management in the annual reports reveal useful information as to where management want to take the business. What is their strategy for the business? Where are they focusing their attention and resources?

What risks to the business do management note?

Are there new product offerings on the horizon?

Are they developing their own D2C propositions?

What is the company’s history of compliance? Any past or pending issues with the regulator?

Are they committed to the adviser relationship? How have they invested in servicing this relationship? Do they have local offices and are they increasing or reducing this local presence?


Once we’ve looked at and exhaustively assessed all these areas and we’re happy with the structure, stability, and sustainability of the DFM business, we move on to the next part in our evaluation process. That will be detailed in the next article in this series.

David Perkins is a consultant at RSMR. Prior to his work on investment management, he owned and ran an IFA practice