Partnering to stay as need for advice grows

Financial advisers who wish to concentrate on building and nurturing their client relationships are increasingly choosing to partner with a discretionary fund manager for portfolio investment management.

Following the Retail Distribution Review, the role of a financial adviser has been moving towards one of holistic financial planning, enabling clients to fulfil their dreams and aspirations through a plan that considers every facet of their life. Advisers are often the first port of call during difficult times, and it is this more human side of financial advice, as opposed to investment decision-making, that clients value the most.

Partnering with a DFM enables financial advisers to give their clients the in-depth financial planning advice they desire. And with solutions ranging from model portfolios and multi-asset funds through to bespoke discretionary fund management, there is more choice than ever when advisers are deciding which is the most suitable approach for their clients.

Why partnering is growing in popularity

Building and managing a portfolio of investments takes precious time away from talking to clients, guiding them through tough times, and deepening the financial planning journey. Share prices, exchange rates, bond yields and commodity prices can fluctuate dramatically, and keeping up with market movements is complex and time-consuming.

The backdrop of loose monetary policy and low interest rates has made this even more challenging. Whereas in the past it was relatively simple to construct a diversified multi-asset solution, these days asset classes have become closely correlated to one another, making it harder to identify assets that will perform differently in a range of market conditions.

By partnering with a DFM, advisers gain access to a team of experts who have in-depth knowledge of each asset class, experience in identifying uncorrelated positions, and the time and know-how to monitor and adjust positions based on market movements. This leaves advisers time to concentrate on giving the best advice, while the DFM concentrates on delivering performance.

Investing in a post-PROD world

The more complex regulatory environment that advisers are operating in has also enhanced the case for partnering with a DFM.

Following the introduction of the Product Intervention and Product Governance Sourcebook, or PROD, advisers are encouraged to segment their client base and ensure each segment is being given the most appropriate investment solution. Historically, clients were segmented according to assets, but following PROD advisers are segmenting clients at a more granular level, taking into consideration their life stage, tax position and sustainability preferences, among others. Multi-asset solutions can help here because they have defined target markets and there is a variety of options to help advisers meet different clients’ needs.

Two common options are multi-asset funds and model portfolios. An important distinction to be aware of is the way these solutions are taxed. Clients who have fully funded their ISA and pension allowances could incur capital gains tax (CGT) while holding a model portfolio in a General Investment Account. This is because clients with a model portfolio directly hold the underlying investments, so CGT could arise when the investment manager buys and sells positions. With a multi-asset fund, CGT would not usually arise until the fund is sold further down the road. The right solution for one client won’t necessarily be the right solution for another, so having these different options ensures a variety of differing client needs can be met.

Another distinction is that model portfolios enable clients to see all the underlying investments, whereas when a multi-asset fund is held this may be less clear. From an adviser’s perspective, they could find that platforms offer more multi-asset funds than model portfolios because of investment holding restrictions on the latter.

As well as traditional model portfolios and multi-asset funds, there are also sustainable multi-asset solutions, which help advisers meet the needs of ethically minded clients. And for those with more complex requirements, a bespoke DFM service that is tailored to clients’ unique priorities and goals often proves especially valuable.

Two heads are better than one

There is a growing recognition that when it comes to financial planning and investment management, two heads are better than one.

By partnering with us, your clients benefit from increased time with their adviser, enabling them to navigate major life events and feel confident about their financial future. All the while safe in the knowledge that their investments are being carefully managed by our team of in-house experts, who are devoted to monitoring and reacting to market movements and delivering outcomes aligned to their plans.

We’ll give you back precious time to focus on what really matters – your clients.

The value of investments can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy.