This article was originally published in the May 2022 edition of MoneyMarketing.
The challenges advisers face when their businesses reach scale, through the complexity of trying to stay on top of a multitude of client portfolios, spread across various platforms and products are vast, but these are further heightened by ‘the elephant in the room’- namely Treating Customers Fairly (TCF). The consolidation of client portfolios and the ability to bulk switch or tweak groups of clients becomes an absolute necessity to meet the 6 TCF outcomes expected by the regulator.
Servicing a book of clients with a limited or non-existent Centralised Investment Proposition is a terrifying situation to be in and in direct contradiction of the TCF principles. A CIP typically results in a consolidated book structure where investment philosophy, portfolio construction and consistency, time horizon factors, risk management and product suitability are supported by consolidated client reporting. The services of a DFM pulls all this together.
Key Individuals (KI) of advisory Groups should always consider the risks associated to their practice with having a book of clients that is not consolidated into meaningful, structured portfolios supported by the above-mentioned benefits. It is important to remember that not all DFMs are equal and their levels of flexibility, collaboration and personalisation offered vary greatly. Partnership with a DFM could sound restrictive to Representatives of an advisory FSP, as it might appear to challenge their creative thinking and expertise, but with a DFM like MitonOptimal the portfolio structuring is done through a consultative and collaborative approach, involving the participation of the KI’s and Business Representatives. At MitonOptimal we are driven by our adviser clients’ advice process, so this collaboration is crucial to the overall success of the relationship.
A DFM allows advisers to focus on giving the best advice to their clients by taking responsibility for setting the CIP, managing investment portfolios and meeting the investment objectives. As long as an adviser has allocated a client to the correct model for their circumstances – their responsibility has been met. The risk mitigation and peace of mind this ‘insourcing’ of investment expertise provides at all levels of an advisory practice (Business owners, KI’s, Representatives and Principals) cannot be ignored – especially in the highly regulated and extremely volatile conditions impacting the financial services industry.
George Dell
Head of Business Development
For more information about our DFM Offering, please email us at mail@mitonoptimal.com
The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness. MitonOptimal South Africa (Pty) Limited is an Authorised Financial Services Provider Licence No. 28160, regulated by the Financial Sector Conduct Authority (FSCA) – Registration No. 2005/032750/07.MitonOptimal Portfolio Management (Pty) Limited is an Authorised Financial Services Provider Licence No. 734, regulated by the FSCA – Registration No. 2000/000717/07.