11 Who is a co-manufacturer? Scenario 1 • Adviser firm partners with a discretionary manager who runs a series of discretionary model portfolios designed specifically for the clients of the adviser firm • Adviser firm sets the mandate for each portfolio and has influence over asset allocation and fund selection • A joint Investment Committee is set up • Adviser firm agrees target market for each portfolio with the discretionary manager • Discretionary manager has an in built majority on the investment committee and power of veto on investment management decisions • Discretionary manager ultimately responsible for all investment decisions • Proposition co-branded This scenario is likely to be a co-manufacturing arrangement. Although the discretionary manager is ultimately responsible for the investment decisions, as it is the entity with the discretionary management permissions, the adviser firm is likely to have material influence over the investment strategy and target market. In effect, the adviser firm has ‘commissioned the service’ and is a co-manufacturer of that service. This type of scenario is often referred to as a ‘tailored’ or ‘bespoke’ solution as it is tailored or bespoke to the clients of the adviser firm. Scenario 2 • Adviser firm decides to recommend the discretionary model portfolio service of a particular discretionary manager • The portfolios are ‘off the shelf’ and not targeted specifically to the clients of the adviser firm • Arrangement is co-branded This scenario is unlikely to be a co-manufacturing arrangement because the adviser firm appears to have no influence over the investment strategy or target market. It is simply a co-branded solution. However, for further information on this please see below under white labelling / co-branding. White labelling or co-branding a proposition brings with it other regulatory issues which require very careful consideration. The checklist at Appendix 1 will assist firms to establish if a co-manufacturing arrangement exists.
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