Discretionary fund manager struggle to truly focus on clients’ objectives and are not dynamic, according to Thomas Miller Investment.
Matthew Lonsdale, head of intermediary business development at the firm, said DFMs also have difficulties in translating market movements, performance and portfolio management decisions into a language clients can understand.
‘As an industry we are not dynamic enough. Many firms are still shoehorning clients into a ‘balanced index’ portfolio, and rarely focus the investment strategy on what the individual client needs,’ he said.
‘It is our role as the DFM to speak in plain language to financial advisers and private clients, to translate what we are doing in portfolios and relate that to how the clients can achieve their retirement goals, or send their children to school, or how they pay the mortgage.
‘We need to move away from the emphasis on short term performance and focus more on meeting individual objectives in the long term. The industry is often poor at subjectively analysing performance for clients; good or bad revolves around who has made the most money in a given quarter or year not whether they are on track to meet the clients long term investment goals.’
Tony Bray, head of client relationships at adviser firm threesixty, voiced concerns about clients’ lack of understanding about the underlying investment tools that DFMs use and how they convey this to the underlying client.
Others have warned that warned that too many intermediaries continue to buy products off the shelf.
Research by financial planning firm eValue found that post-RDR, 97% of advisers use a centralised investment proposition of which 30% are risk-rated funds and 70% are model portfolios, with only 3% opting for bespoke funds.
‘It is clear that the vast majority of the industry is still focused on selling product; a large number of advisers are buying an all purpose solution, which does not necessarily take account of an investors’ financial objectives and circumstances – for example existing well managed investments that a client may have,’ said Bruce Moss, strategy director at eValue.
‘Advisers are selling themselves and their clients short. The industry can and must work at delivering something that is much more valuable to clients and which addresses their potentially changing needs.’