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DFMs must do more to impress advisers, survey finds

14 May 2018

Defaqto’s latest DFM service satisfaction survey has revealed that discretionary managers must do more to impress advisers, with just five out of 14 categories exceeding expectations.

The survey, which asked advisers to rate DFM providers in relation to the importance of 14 categories, showed that selecting a Managed Portfolio Service (MPS) through a platform is growing in popularity, whereas managed portfolios accessed through direct custody is declining.

Defaqto said this trend could well be as a result of lower minimum investments available through a platform, as well as advisers wishing to feel more in control of their client.

The financial information firm said the results indicated that advisers generally offer a wide range of investment choice from different firms, including some advisory portfolio management.

Two thirds of advisers run some client portfolios on an advisory basis, an increase on last year’s figures which Defaqto said could potentially show that confidence in running client portfolios is beginning to return in the wake of the Retail Distribution Review. Of the advisory business placed, three fifths is in multi-asset funds.

“The shape of the market remains dominated by a handful of discretionary managers,” according to Defaqto. “However, the tail is growing as increasing numbers of DFMs are beginning to get some traction in the adviser market.”

High on the priority list for advisers is investment flexibility, with range of assets and range of options ranking first and third respectively in their list of most important aspects of service. Quality of investment staff came in second place, with advisers placing great value on the expertise and skill of people.

While four out of the top seven aspects of service were found to be either meeting or exceeding expectations, overall satisfaction levels have fallen.

Pan Andreas, head of insight and consulting for funds and DFM at Defaqto (pictured), said: “Four out of the top seven categories in terms of importance are either meeting or exceeding expectations. This is a slight improvement on last year, where only three out of seven were meeting or exceeding expectations.

“However, the industry should not be giving themselves too many pats on the back or become complacent, as a closer look at the numbers reveal that overall, satisfaction has fallen by some 2% on average, and individually, satisfaction has fallen in 10 out of the 14 categories. Not always to the point that expectations are not being met, but this is a worrying trend that needs to be addressed.”

Andreas said the general fall in adviser satisfaction meant discretionary managers are “going to have to up their game,” if they want to compete with their peers and other investment outsourcing avenues.


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