Rory Percival outlined the critical actions planners should take when they are selecting a DFM partner. He was speaking at a DFM due diligence seminar in London run by the online DFM forum DISCUS and in association with Financial Planning Today.
He warned that the FCA will be able to see through any attempts at retrofitting, saying it was “very easy” to spot it, even for less senior regulators.
He said the FCA had seen this happening often, with firms selecting a DFM and then putting together some paperwork afterwards to make it look like it had carried out reviews beforehand.
Mr Percival stressed that firms must undertake the due diligence process “genuinely and robustly”.
He also emphasised it was crucial that businesses do due diligence impartially and don’t select one simply because they know the DFM or saw them at a conference and liked them.
He said: “If you do those two things (as above), solutions will flow naturally and you will end up with a robust conclusion.”
The first step when doing due diligence, he said, is to start with clients, and keep them at the heart of process.
Planners should ask themselves ‘who are my clients and why might a DFM be appropriate?’.
He gave delegates three examples of why they might use a DFM.
1 - If a firm has a category of clients who want an all in one, simple solution, perhaps looking at multi-asset funds as one example, then managed portfolio services are a valid comparator with those types of funds and a firm might want to consider DFM solutions.
2 - Clients with complex investment situations - a classic example being CGT laden portfolios, with share options, needing to manage out capital gains over time. He said that kind of complexity sits well with what a DFM can offer.
3 – Clients with complex retirement income needs – perhaps they need flexibility with lump sums or coming out of pensions with a large drawdown pot – a DFM might be able to manage that on bespoke perspective.
Mr Percival, who has been guest speaker at Financial Planning events in recent years, recently exited the FCA to take on a new consultancy venture of his own.
Packed room for the DIM / DFM due diligence event with @Discus_uk @bankhall #discusdebates pic.twitter.com/NGOroua74F
— Stephen Gazard (@StephenGazard) December 6, 2016
"Review systems & controls ... sit down and think about what could go wrong and work out how to mitigate" @rorypercival @bankhall @Discus_uk
— Stephen Gazard (@StephenGazard) December 6, 2016
Now over to @FPT_Kevin for the expert panel discussion #DISCUSdebates pic.twitter.com/pkxExK7hMz
— DISCUS (@Discus_uk) December 6, 2016
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