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Advisers rank quality of service as key factor in DFM due diligence


Advisers rate quality of service as the single most important factor in deciding to appoint a discretionary fund manager (DFM) and terminate the relationship, according to a new study conducted by Investec Wealth & Investment (IW&I).

Two-thirds (67%) of IFAs cited the quality of service as the most important factor when undertaking due diligence on a DFM while 61 per cent would end the contract if service standards fell.  Consistent investment performance (54%); value for money (51%); transparency of charges (42%); and cost of management (42%) make up the top five most important factors applied by advisers in selecting a DFM. 
According to IW&I’s study, advisers apply the same five criteria when reviewing their ongoing relationship with the firm, underlining a high degree of consistency in how DFMs are appointed and monitored over time.   
However, advisers are far less certain that their peers apply the same due diligence criteria in hiring a DFM and reviewing the ongoing relationship: while 39 per cent of IFAs believe this to be the case, 35 per cent say that they use different factors.
Mark Stevens, Head of Intermediary Services, Investec Wealth & Investment, says: “Successful advisers know only too well the importance of providing a high quality service to their clients and it follows that they expect a similar focus on this area among their DFM partners. IFAs have a very clear understanding of the type of relationship they want with their DFM and are rightly focused on ensuring that it remains.
“The high degree of overlap in the key factors influencing the decision to appoint a DFM and reviewing the firm’s ongoing performance is particularly encouraging as it underlines the efficiency and transparency that characterises most successful partnerships. Our own experience in working with advisers closely mirrors these findings.”
According to IW&I’s study, advisers predict that the popularity of bespoke DFMs will remain popular among their clients with nearly three quarters (71%) forecasting that demand will either increase or stay the same over the next five years.

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