While a number of platforms offer advisers access to third party discretionary fund managers (DFMs), the methods they use can vary.
One adviser concern, according to Freddie Findlater, head of advisory platforms at The Platforum, is how much access to the end clients DFMs will have.
He explains: “In terms of technology and what you can do to either restrict or open up the platforms for DFMs means that some have done it differently. For example some platforms will ask advisers how much of the client’s portfolio they want the DFM to have visibility of.
“I think a lot of the platform’s role in this is related to the fact advisers are cautious. They want to protect the relationship with the client so when they are asking a DFM to manage some of the money what platforms can do is say they will essentially give the DFM a restricted view, so they can only play with what they are given, so to speak.”
Bill Vasilieff, chief executive of Novia, highlights the developments in technology that make it easier for DFMs to be hosted on platforms. He says: “On the Novia platform it is very straightforward, the way our platform has been designed means we can automatically collect fees on behalf of the DFM and pay them to the DFM.
“We also launched a new online tool roughly two months ago called model portfolio manager, which allows the DFM to set up the model portfolio on our platform from his office and to administer that model portfolio from his office and to allocate IFAs and clients to that model, so it is all totally automated now and DFMs love that.”
Barry Neilson, business development director at Nucleus, agrees that access to DFMs will vary heavily depending on the technology structure of the platform, the range of asset types available and the ability of the platform to facilitate fees to the DFM in a transparent and RDR-compliant manner.
He adds: “Some platforms will allow the DFM to access the platform and provide online tools to enable DFMs to edit their portfolios and cascade any changes across all connected clients. Advisers need to be mindful about the VAT position of utilising a DFM service and understand the impact this may have on their overall client proposition.”
As the effects of the post-RDR world start to become clearer the continued development in technology and the growing range of offerings catering to advisers wanting to outsource investment duties and stick to the advice side means that the growth of DFMs on platforms are likely to be a growing trend in the years to come.
Mr Neilson adds: “The users of the Nucleus platform adopt a wide range of different approaches to satisfying the investment needs of their clients although we are clearly seeing an increasing interest in the concept of outsourcing the investment management. For many advisers this will de-risk an important part of their client proposition and allow them to focus on areas where the client perceives more value.”
