The financial adviser remains in overall control, with responsibility for the client relationship and suitability, adding value through financial and tax planning activities. The investment manager focuses on managing the client’s money in line with the agreed mandate from the adviser, drawing on its greater access to specialist research and resources.
This division of responsibilities plays to the strengths of each party and delivers a compelling, cost-effective proposition to the client. It removes the significant additional internal overheads required when managing portfolios within the advice business and can also help manage any key person risks, with investment decisions taken in conjunction with the external partner, rather than solely in-house.
Ensuring the right partner
However, to successfully address these common issues, selecting the right investment partner is vital. One which supports and adds value to the adviser/client relationship and delivers cost efficiencies as well as the best outcomes for the end-investor. A large part of this will come down to the strength of the relationship with the DFM.
Access to key people, especially investment managers and senior management, is key to retaining a dialogue with those you are entrusting to deliver on your client’s goals and aspirations. Your investment partner should be an extension of your internal team, so cultural alignment and strong working relationships are crucial.
Quality of communications is also hugely important. This not only covers the availability and accessibility of relevant staff, but also extends to client-facing reporting and documentation. A critical area to get right is client disclosure and agreements, setting out the basis of the new arrangement. Whether you are working on reliance on others or agent as client basis, it is important that the client understands who is responsible for their financial advice, suitability and investment management. Your investment partner should be able to help with this.
All of these issues serve to demonstrate how any provider who wants to enter this market will need to commit to working in partnership with advice businesses.
This is not about being a product provider, a DFM is more often an extension of the advice company, managing client money with complete alignment to the advice company's beliefs and requirements.
As the market becomes more and more competitive, the standard of services on offer to advisers, and the outcomes being generated for their clients should continue to improve. Competition driving all parties to continuously improve, all for the benefit of the end client.
Robert Vaudry is managing director of Copia Capital