The use of discretionary fund managers has increased over the past 12 months, but there is potential for more IFAs to outsource, according to Investec Wealth & Investment.

The firm’s annual DFM survey found that around a half of IFAs now use DFMs and 82 per cent use platforms. The average number of client portfolios outsourced to an external manager increased from 28 per cent in 2011 to 34 per cent in 2012; a quarter of IFAs outsource more than half of their clients’ portfolios to a DFM for bespoke investment management, up from 22 per cent last year.

The research reveals that 20 per cent of IFAs expect to increase the number of client portfolios outsourced due to RDR, with just 3.8 per cent claiming they will reduce. Three-quarters of IFAs surveyed envisage no change.

The most important criteria cited by intermediaries when choosing a DFM are quality of service (92 per cent), investment performance (91 per cent) and personal relationship and trust (89 per cent). The least important factors are compliance (50 per cent), size of the DFM’s assets under management (50 per cent) and the use of explicit non-compete clauses (62 per cent).

The IW&I research was conducted among 249 intermediaries in November 2012.