![]() The median requirement is £50,000.Ĭhart 1 and Chart 2 show two sample growth portfolios from Brooks Macdonald and North Investment Partners on a middle- to high-risk basis, although the two are not directly comparable as they Heartwood and Thurleigh require at least £500,000 to access their model portfolios. Only Octopus has no stated minimum followed by North Investment Partners as the next lowest at £1,000. Minimum investments required vary hugely but are lower than amounts needed for a bespoke service, which can spiral into millions. ![]() A low figure need not mean poor service for advisers though, as some will only just have opened up to the adviser market. Six managers in the Table gain business exclusively through advisers: Berry Asset Management, Brooks Macdonald, North Investment Partners, Octopus Investments, Standard Life and Wells Capital Investment Solutions. Even this could have an impact when choosing the right manager a large one is more likely to benefit from the economies of scale, but smaller managers might argue they can provide a more personal service, orthat their lower assets reflect an acceptance of lower levels of business.Īnother consideration is how much business a DFM does through financial advisers – those who work with advisers most of the time will have more experience of intermediary-specific needs. ![]() The average funds under management is £1.75bn, encompassing a wide range from £50m managed by North Investment Partners to £3.75bn under Brooks Macdonald. At the other end of the scale there is North Investment Partners that offers 12. Some, such as Saltus Fund Management, offer just three portfolios. There are many elements for advisers to take into account when selecting a DFM model portfolio. The 22 of these awarded a five-star rating are shown in Table 1.Ī vast array of approaches is used, even among the top-rated managers. The latest DFM research from Defaqto showed 65 discretionary management services offering a model portfolio solution. The point at which waters start to muddy is if the client has more money to invest or tweaks to the portfolio become necessary, in which case a bespoke solution starts to look more appropriate and a three-way relationship needs to be managed. Off-platform should not be a problem either as the whole point of model portfolios is that the client does not have a relationship with the discretionary manager the adviser simply chooses the right portfolio as they would any other investment. Discretionary model portfolios are increasingly available on platforms, in which case the manager is accessed at arm’s length and there is little risk of clients defecting to the DFM. It may seem obvious, but a risk level five on a risk-profiling tool may not match a DFM’s level five, and two DFMs’ ratings may not match one another. Transferring in specie may be an option for at least some assets, but could come with an additional cost. If the client has assets elsewhere, it is important to ensure they do not conflict or double-up with the model portfolio, which could affect the overall risk level. An additional layer of cost is added on, however, which must be justified by a better client outcome than not using one.Īdvisers remain responsible for choosing the right model the discretionary manager must ensure they work within the remit stated by the portfolio. It also allows you to spend more time focusing on the client’s goals and overall financial planning, while allowing someone with the right expertise to worry about specific fund allocation. If your business model does not support in-depth fund selection but your clients do not warrant a full discretionary service, a model portfolio might be an appropriate solution. The main benefit of a DFM model portfolio is that it allows access to a discretionary manager at a lower cost and a lower asset barrier. Some DFMs do, however, offer a unitised version of their model portfolio, allowing access for investors with even lower levels of capital than required for the portfolio. The discretionary manager makes allocation decisions and they work within a particular remit – income, growth or a defined level of risk, for example.Ī DFM model portfolio is broadly comparable to a multi-manager fund, but the portfolio is not unitised. All monies are managed under the same investment strategy. Instead of full-blown discretionary management, a DFM model portfolio is open to any investor with the required minimum sum. But with the RDR now in full force, DFMs have developed a method of providing an outsourcing solution for advisers and clients in the form of model portfolios. Most have traditionally been the reserve of very high-net-worth clients, beyond the realms of a typical adviser’s client bank. Many DFMs have realised that advisers are looking to outsource investment decisions.
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