10 Relationships between advisers and DIMs Selecting the right investment solution Before looking at the detail of the structure of the arrangements with DIMs, advisers first need to look at their client bank (target market) and investment proposition, and consider whether a discretionary management solution is appropriate for their clients in the first place. A firm’s investment proposition – which may or may not include using a discretionary management service - underpins how the firm and its advisers deal with clients, so it is important that the investment proposition is thought through clearly, properly documented, and subject to a robust governance process. Adviser firms with a diverse range of clients will need to consider segmenting their client bank and potentially offering a range of solutions to meet the needs of the different segments (target market). It is unlikely that one size will fit all. Discretionary investment management propositions DIMs offer a wide range of solutions and can work with adviser firms in many different ways. It is up to the adviser firm to select which solution works best for them and their clients. This includes the structure of the arrangements where the implications for both the adviser firm and their investors need to be considered. The main types of service are: • Discretionary investment management - Bespoke • Discretionary investment management - Model Portfolio Service (MPS) Some DIMs also offer white-labelled or co-branded services. Bespoke services With a bespoke service, the DIM tailors the discretionary management service to the specific requirements of an individual investor. This is likely to be used where the client has very specific investment requirements or wishes to have the ability for direct contact with the investment manager. Bespoke arrangements can be structured in different ways, such as a referral by the adviser firm to the DIM or on the ‘reliance on others’ basis with the DIM working in conjunction with the adviser under a tripartite arrangement. In both set-ups, there is a direct contractual relationship between the DIM and the underlying investor. Chapter one - Relationships between advisers and DIMs
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