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Brooks Macdonald issues new 7 Steps DFM due diligence guide

8 January 2019

Brooks Macdonald has revised its 7 Steps guide to DFM Due diligence. The new edition builds on the presentations given at Professional Paraplanner’s Technical Insight Seminars in 2018 and is accredited for two hours of structured CPD.

Andrew Denham Davis, director Business Development, says the collapse of DFM groups Beaufort Securities and Strand Capital has brought the importance of having a robust due diligence process sharply back into focus for advisers outsourcing investment management services for their clients, as well as highlighting the key findings published in the FCA’s Thematic Review from 2016 on assessing suitability, such as due diligence being ‘one of the three root causes for poor consumer outcomes’.

Davis says: “While we fundamentally believe that partnerships between adviser firms and discretionary fund managers provide the best possible outcomes for clients, we appreciate those seeking to outsource investment and research capabilities have much to consider in what is an extremely competitive marketplace.”

Brooks Macdonald has suggested a four pronged approach to DFM due diligence:

1. The range of services available: Do clients require a specific service?

2. Performance: Does the DFM contribute to Asset Risk Consultants’ (ARC) private client indices to allow for performance analysis?

3. Back-office systems and controls: Can you assess the adequacy of the controls and procedures in place to mitigate the regulatory and business risks arising from provision of investment management services?

4. Financial strength: Does the firm have the financial strength required to ensure that clients’ assets will be recoverable, depending on market movements?

“A focus on these four areas will ensure advisers place their client’s needs at the centre of the process – while also considering the suitability of the DFM to their own business requirements.

“To help advisers and paraplanners with the process, we have recently published the eighth edition of our Seven Steps to DFM Due Diligence, including a customisable Excel spreadsheet to enable a custom shortlist of appropriate DFMs for client recommendation to be generated.”

Davis adds that TR16/1 also recommends that advisers ‘consider whether they can rely on the information supplied by the provider, such as marketing materials’. As such, our guide includes third-party independent analysis of the four areas below from Defaqto, Asset Risk Consultants, threesixty and AKG Financial Analytics to help advisers demonstrate the robust nature of the process to the regulator.

The guide and short test required to receive the CPD certificate are available at www.brooksmacdonald.com/seven-steps]


Professional Paraplanner