1. One size definitely does not fit all: Consider DFMs of all sizes
When starting your search you would be wise to use an online resource such as PAM (Private Asset Managers) which is the online tool available for finding and selecting private asset managers in the UK. This will make sure that you are presented with a fully comprehensive list of the options available to you so that you are not tempted to opt straight for the largest or most recognised brand in the industry.
Particularly if you are a small business, choosing the largest firm might not be the smartest move as you may find that you end up ‘getting lost’ or getting pushed down the queue when it comes to the ongoing service you receive.
Carry out a comprehensive and fair analysis of the market and objectively consider a wide range of investment solutions before selecting the DFM’s that are suitable for your clients.
Questions you might want to ask, especially if you are a small business, may include where the company is based to ensure you have enough face to face time with your Investment Manager, how much time they can give you in terms of their existing commitments to other clients and ultimately, whether or not you can form a good relationship with that firm and the team supporting your clients’ specific requirements.
2. Understand the portfolios: Prepare your own due diligence questionnaire
The sheer number of investment propositions offered by DFM’s has risen significantly in recent years, so it can be difficult to decide which one is most suited to your client base.
Bear in mind, that you may find you need to work with more than one DFM to satisfy the requirements of all your different clients.
All DFM’s have different styles and investment strategies so you may find that one firm’s portfolio is more suited to your low risk clients and one is better for the moderate risk profiles, for example.
Each and every solution is different from model to bespoke and from active to passive. Ultimately, it is up to you to decide which DFM (s) are going to be the best fit for your clients and their differing attitudes to risk.
When considering your options, first and foremost, it is important to understand exactly what it is you are buying into.
You should find out important details about how the portfolios are constructed, what risk controls are in place and what fees and costs are associated with them; as this will vary from one DFM to the next.
When you have shortlisted three or four candidates, you should prepare a detailed questionnaire to send to them.
Questions you may want to ask could include information about their services and products and company culture, background, investment experience and history of the firm as well as level of experience and details of their terms and conditions.
3. Endorsement from a trusted source: Look for third-party recognition
With an overwhelming amount of sales and marketing literature available from a growing number of DFM’s nationwide, it can be difficult to navigate your way towards identifying those firms who represent quality service, flexibility and value for money all at once.
You should always check that the DFM’s on your final shortlist have been able to obtain third party recognition from several reliable and trusted sources.
The obvious place to start would be with quality star ratings and independent industry awards.
4. Don’t be tempted to cut corners: Look for value, not cost
According to an old saying, you get what you pay for in life. When it comes to choosing a DFM for your business, never has there been a truer word spoken.
It is all too tempting to opt for a firm offering the cheapest management fees, but ultimately you would be better off looking for a proposition that can promise value for money in terms of the level of service you receive on an ongoing basis.
When considering the fees and costs associated with outsourcing, you should compare each DFM on your shortlist by what additional services you can expect for your money including how much face to face time you can expect from your account manager as well as regular updates by phone or email.
5. Make sure you have things in common: Look beyond AUM
Many advisers will look for and are quickly impressed by substantial assets under management at first glance.
Whilst AUM and the growth of AUM might seem to be the most obvious way to measure a firm’s overall success, it might not be the best guideline to use in terms of assessing the suitability of that firm to the needs of your clients.
The rule of thumb is that you need to match your DFM to your business. It really helps if you are of a similar size and scale and share similar company values and organisational characteristics.
