The discretionary fund management industry continues to struggle to be truly focused on clients’ investment objectives and is not dynamic enough, according to investment management firm Thomas Miller Investment.

The discretionary fund management industry continues to struggle to be truly focused on clients’ investment objectives and is not dynamic enough, according to investment management firm Thomas Miller Investment.

Matthew Lonsdale, head of intermediary business development at Thomas Miller Investment, said at a recent roundtable hosted by the firm that DFMs and advisors face challenges in accurately translating market movements, investment performance and portfolio management decisions into a language that clients can understand and appreciate.

“As an industry we are not dynamic enough. Many firms are still shoehorning clients into a balanced index portfolio, and rarely focus the investment strategy on what the individual client needs. It is our role as the DFM to speak in plain language to financial advisors and private clients, to translate what we are doing in portfolios and relate that to how the clients can achieve their retirement goals, or send their children to school, or how they pay the mortgage,” said Lonsdale.

Tony Bray, head of client relationships at threesixty, a support service for advisors, said that while advisors may like the style of a particular manager, they do not necessarily have a full understanding of the investment instruments that DFMs may use.

“For example, some advisors may think a particular DFM portfolio is attractive, but they could have underlying exposure to UCIS funds or structured products which may not be suitable for certain retail clients. Without a comprehensive due diligence process it can be very difficult to understand how particular DFMs construct portfolios and how individual managers are monitored,” said Bray.

“We would expect to see firms tracking the advice of individual advisers so that firms can spot whether one particular outcome is being recommended over and above what is suitable. DFMs and advisors must be very clear about the impact of portfolio performance on long term investment goals, in a language that the client can comprehend," he added.

A recent survey by financial planning solutions provider eValue showed that post-RDR, 97 per cent of advisors are choosing centralised investment propositions, of which 30 per cent are risk rated or risk targeted funds, and 70 per cent are model portfolios. Only 3 per cent of advisors are using bespoke funds for their clients’ needs.

Bruce Moss, strategy director at eValue said it was clear that the vast majority of the industry is still focused on selling product.

“A large number of advisors are buying an all purpose solution, which does not necessarily take account of an investors’ financial objectives and circumstances – for example existing well managed investments that a client may have. Advisors are selling themselves and their clients short. The industry can and must work at delivering something that is much more valuable to clients and which addresses their potentially changing needs,” said Moss.