Editor Michael Wilson wants your say on the DFM issue


We seem to have ruffled some feathers with our recent discussion of the outsourcing issue – not least, our report on an Investec study claiming that half of all advisers are now using DFMs in some way or another. And now we’d like to know what you think.


Responses from our readers so far have ranged from a flat disbelief that this DFM claim could ever be true, to a feisty defence of all that it means to be Independent – not just in the rather woolly sense of the FCA’s own do-it-yourself classification, but also in the sense of where the adviser’s own convictions lie.

The issue seems to focus particularly on the question of whether an adviser who takes on an outsourcing service has sacrificed an innocence that can never be reclaimed.

Who’s Liable?

It also drills down rather swiftly to the question of who is to be liable for the results of the outsourced party’s decisions. Will it be the adviser or the DFM that gets carpeted if things go wrong? And if the adviser has clearly stipulated the client’s requirements to the DFM, does that alter the balance of responsibility? If so, how?


Where To Draw The Line?

I am indebted to our good friend Harry Katz, of Norwest Consultants, for allowing us to reprint an extract from his recent email to our offices:

I have to say that ‘Outsourcing’ is something else I have great difficulty with.

“So Mr Client, you want to invest £100k. Fine I’ll let so-and-so do this for you, and I’ll charge you a trail or Funds Under management charge of x% p.a for actually doing b****r all”.

I cannot really conceive why clients stand still for this – why not just go straight to the DFM?

It strikes me that advisers who do outsource are not really at home with investing. It seems to me they want the income but can’t (or won’t) do the work.  I’m amazed that the regulator stands still for this.

I do refer to a stockbroker from time to time, but it is a REFERRAL not outsourcing.  I do not expect any kickbacks. I might charge a fee for the initial advice, but once the stockbroker does the investing I have no pecuniary interest.

However I insist on my ground rules:

·       No collectives

·       Ability to buy stock worldwide. (EG, Microsoft, Novartis, BMW, Syngenta, Noble etc) – I’m not saying they have to invest in these companies, it is merely an example of global investing capability – which not all DFMs possess.

·       Absolutely no ‘model portfolios’ Every one bespoke and unique.

As to outsourcing compliance. I guess that’s an option, but if a goolie is dropped, the Compliance Consultant still pockets the fee and has no culpability. Not much of a deal in my book.


What’s your view? Leave a comment, or email me at editor@ifamagazine.com and let me know whether you’re happy for us to publish – without your contact details, obviously. We look forward to hearing from you.


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