However, private investors can also access discretionary services directly.
Brooks Macdonald Asset Management is an option for investors looking for a tailor-made multi-asset portfolio.
The company has been awarded a five star-rating by project provider Defaqto.
Jon Gumpel (pictured), investment director at Brooks Macdonald, outlined the benefits of using his group’s tailored models over other outsourcing methods:
"We provide balanced risk-related guidance portfolios to private investors," he said. "We work in partnership with professional advisers and IFAs to create competitive and balanced portfolios."
"We aim to add value by achieving the desired asset allocation, utilising all available investment mediums. Rather than limiting exposure to direct equities and unit trusts, BMAM considers alternative investment media such as investment trusts, OEICs, institutional structured products, ETFs and cash."
Brooks Macdonald provides discretionary services at various entry levels. On the high end, investors can access the firm’s bespoke portfolios, and individual portfolio managers, for a minimum investment of £200,000.
Its bespoke portfolios are managed on a discretionary basis and reflect the individual’s investment objectives, tax status and attitude to risk.
The firm also offers a managed portfolio service for investors with a minimum of £20,000 to invest. These portfolios are managed purely off Brooks Macdonald’s asset allocation guidance.
The managed portfolios can only be accessed through professional advisers and there are five different actively managed and risk-adjusted portfolios.
As well as the discretionary service, Brooks Macdonald also offers four funds of funds that attempt to provide a similar diversification to the managed and bespoke portfolios.
Gumpel runs the IFSL Brooks Macdonald Defensive Capital fund, which has outperformed its sector since launch in 2004.
According to FE Analytics, over five years the fund has returned 17.2 per cent compared with 12.61 per cent from the IMA Mixed Investment 20-60% Shares sector.
Gumpel says there are a number of areas private investors should look into when searching for a discretionary fund manager.
"Discretionary fund managers should have access to high-quality investments and with that a balanced range of investments."
"These should be well run and well researched across a wide range of assets, and pulled together for private investors’ own needs and requirements," he commented.
"They should also be for investors that are looking for the longer term, using specialist investment professionals who can make the decision for the investor who either doesn’t have the time, knowledge or expertise."
Gumpel says there has been an uptick of inflows into Brooks Macdonald and that it now has £4.8bn of assets under management.
He adds that there are a number of methods investors can use to access the company’s portfolios.
"We probably have 25 to 30 per cent of our clients accessing us directly and the large majority come through professional advisers and IFAs, as we provide online valuation information. Investors can also access our funds of funds through fund platforms."
Investors hoping to gain access to Brooks Macdonald’s managed portfolio service can either go through their financial adviser or the AXA Elevate platform. The adviser gives the managed portfolio team the investor’s objectives so it can calculate the necessary risk. Defensive income, lower risk, medium risk (active), medium risk (passive) and higher risk portfolios are available.
Brooks Macdonald’s funds of funds can be accessed through an extensive range of investment platforms, including Cofunds, Standard Life and AXA Life.
Chris Spear, managing director at Spear Financial Limited, says that he does not directly use Brooks Macdonald but adds that discretionary fund managers do have their uses.
"They are very good for tidying up clients’ investments," he said. "If someone has a collection of individual shares then they are good for simplifying the tax charges. In that case then I would move clients into them over time."
"DFMs are also good for investment trusts and ETFS (exchange traded funds). With the discounts and premiums that come with these products, it is better and far quicker for a DFM to get in and, more importantly, out."
He added: "In all honesty, it is very difficult for IFAs and investors to get the timing right on these things."
"If I was to put a client into a DFM, then I would want them to meet the management in order to build up a good relationship so both sides know the other’s objectives. Though DFMs are very useful in some circumstances, I don’t think that every investor needs one, because of the double charges."