Harry Kerr, managing director of Avalon Investments, believes the trend to outsource to a discretionary fund manager (DFM) is expected to increase as the RDR deadline gets closer.

But Mr Kerr says, while using a DFM can mean increased efficiency, it can also mean the loss of control of assets.

He said: “What advisers entering this kind of operation often do not see until it is too late is that in signing over the client’s assets and portfolio management to the DFM they are effectively passing on control of a large part of their business.

“Clients can start to question payment of 0.5 per cent trail to their adviser when they perceive the value is being delivered by the DFM. It is not unknown for clients to move their business to where they see the value is being delivered.”

He suggests the use of a platform to run a DFM contract as it means assets stay on the platform and in the control of the adviser firm.

If the adviser wishes to switch platform the assets can be re-registered to another provider.

“The adviser keeps the relationship with the client, undertakes the Financial Planning and tax work but importantly, is seen by the client to be managing the investment process too.

“It is the adviser who then meets the client for the annual review, having drawn reports from the DFM and the platform, and it clear to the client what value is being delivered by the adviser.”