Selecting a Discretionary Management Partner : Part 2 Adviser Checklist
Selecting a Discretionary Management Partner : Part 2 Adviser Checklist
As part of Defaqto's ongoing research into the process of selecting a suitable Discretionary Fund Management partner, to assist or adopt the Adviser's Investment duties, we are delighted to publish a checklist of considerations which is fully explained in the recent Discretionary Management Report for Financial Intermediaries. Click Here to download the full research report from Defaqto.
This second report on Discretionary Management by Defaqto during 2010, is a response to the ongoing and high demand for such research, and attempts to offer Financial Advisers the following benefits:
Continuation of research introduced in the first DMS Guide - published in May 2010
A more advanced level of considerations and due diligence concerns are covered
A far more extensive provider reference table, with additional details on potential Discretionary partners
The research also offers advisers the following Appendix which gives a simple step by step reminder on Due Diligence steps, and Key Differentiating factors between different Discretionary Managers:
Due diligence check list
This summary sheet can be used a practical aid for advisers selecting a discretionary partner or potential partners. Factors to consider and actions to take include:
- Generate group of potential service providers - the market;
- Type of outsourced service required - client need;
- Identify desired process/relationship - adviser need;
- Define key 'selection criteria' and importance levels for each - service comparisons;
- Understand reporting process and administrative processes - client communication;
- Define charging structures;
- Compare access methods. Consider all routes into the discretionary service;
- Produce shortlisted service providers for full due diligence and negotiation process.
Once a suitable service or panel of services has been employed, it is crucial for advisers to review suitability with a full audit of investment solutions periodically: quarterly, six-monthly or at least annually.
Key facts and service variables
The comparable features of discretionary management services are as follows:
- Company/parent, size, credit ratings and financial strength measures;
- Style and approach of investment service;
- Performance histories (risk vs return);
- Key personnel, experience (investment/client type) and qualifications;
- Research levels available to firm;
- Investment process and regulatory framework;
- Assets employed;
- Investment vehicles used;
- Administration and custodian arrangements;
- Investment targets and benchmarks;
- Minimum investment amounts;
- Third party relationships and product offers;
- Reporting and service arrangements;
- Charges/fees;
- Policy on cash assets and retrocessions;
- Approach on the RDR and compliance responsibilities.
