Podcast  

How will the growth of the DFM market affect advisers?

How will the growth of the DFM market affect advisers?

A tussle is growing in the industry between advisers and DFMs over ownership of the client, according to guests on the latest edition of the FTAdviser Podcast.

Head of research at Elston Consulting, Henry Cobbe, said it is important for advisers to think of ways around the issue.

“Running advisory models on an advisory basis can work if you do it well,” he said.

“Advisers are rightly sceptical of introducing into the mix a much larger, much better capitalised firm that has got a huge marketing resource, and huge client ambitions.”

Communications director at AKG, Matt Ward, said there is fierce competition and there is a huge diversity of offering.

“An important part [for advisers] is to think about what part of financial planning they want to focus on.

“Many [advisers] are outsourcing and that is driving the excitement in the DFM world.”

The advantages of outsourcing to a DFM are more operational than investment related, Cobbe added.

The three benefits are being able to change clients’ portfolios at the same time without needing their consent each time, as well as the ability to make asset allocation adjustments.

“DFMs can also run strategies on the same basis, for instance a change in a fund recommendation can be made at same time for all clients.”

Cobbe added that the new entrants to the DFM market have brought a lot of agility, especially in their ability to customise investment offerings.

“A lot of the mainstream MPS providers are very much offering an MPS version of their private client proposition which is in a way quite samey,” he said.

“New entrants are also making a big deal about user interface and how they are integrating investment solutions into the client journey.”

Cobbe and Ward also discussed how advisers should approach finding the right DFM for their client.

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sally.hickey@ft.com