- Whether the discretionary firm and adviser will be able to establish an efficient and supportive relationship for the ultimate benefit of the client.
- Whether the discretionary firm will establish an effective relationship with clients that fits in with the requirements of the adviser – particularly for bespoke portfolios where there is a certain amount of interaction between the client and discretionary firm. This will in part come down to a culture fit.
The aim is that robust due diligence will result in appropriate discretionary manager selection, both for the adviser and client.
It is recommended that advisers meet the shortlisted firms to confirm their data gathering, iron out any issues and get an impression of how easy they will be to work with.
In addition, on an ongoing basis advisers should review the market to a similar depth at least annually – but the ultimate goal is that advisers make the right selection decision first time and reduce the probability of having to make a change further down the line.
David Cartwright is head of insight at Defaqto
What is on offer
The discretionary manager can offer a number of different types of service, including:
- A simple ‘advise the adviser’ arrangement, with the adviser still dealing with all the trading and administration.
- A bespoke service where the portfolios are designed specifically for the client and there is considerable interaction between the client and the portfolio manager. Given the bespoke nature of this arrangement, no two client portfolios will be exactly alike.
- A relatively new addition is the unitised discretionary fund; a fund (unit trust or Oeic) that mirrors the methodology, philosophy and decision making of the segregated alternatives.
- They can also provide discretionary management on a model portfolio basis, known as the managed portfolio service (MPS). Typically, discretionary managers will run a series of portfolios, each designed to match a specific client risk profile. Some of the service elements of discretionary management are retained, but as these portfolios are run on a model basis, clients in a particular risk profile portfolio will have the same portfolio.
Source: Defaqto
