11 Relationships between advisers and DIMs Model Portfolio Service (MPS) With an MPS, the DIM produces a range of portfolios, managed on a discretionary basis, designed to match different levels of risk and objectives. The adviser firm selects the model that best matches their client’s level of risk and objectives and is responsible for ensuring the model portfolio recommended or selected is suitable for the investor. An MPS can be provided either: • ‘On platform’ or • ‘Direct’ MPS on platform MPS are provided ‘on platform’ where the DIM partners with selected third-party platform providers and provides access to their MPS via these external platforms. The platform holds the cash/assets underlying the MPS and manages related administration, for example valuations. Having agreed with a client to use a particular platform, the adviser then recommends the DIM/model portfolio that meets the risk profile and objectives of that client. These arrangements are typically structured on the agent as client basis. MPS direct In ‘MPS direct’ scenarios, the DIM offers its MPS directly to advisers and their clients without the involvement of a third-party platform. The DIM is responsible for safeguarding MPS cash/assets and for MPS administration. In some cases, this administration is handled by a DIM’s own in-house platform. The adviser recommends or selects the model portfolio that best meets the client’s risk profile and objectives. With ‘MPS on platform’ and ‘MPS direct’, the platform (if used), the DIM and the MPS solution chosen all need to meet the needs and objectives of the adviser firm’s clients. The nature of the solution – bespoke, MPS on platform, MPS direct etc. will often dictate how the arrangements between the adviser firm and DIM are structured. For example, it would be difficult for a bespoke discretionary management service to be structured on the agent as client basis if the underlying investor wants a direct relationship with the DIM. Conversely, it is difficult for ‘MPS on platform’ to be set up on the reliance on others basis if the DIM does not even know the identity of the underlying investor. ‘MPS direct’ may be able to be structured on both bases – agent as client and reliance on others. Chapter one - Relationships between advisers and DIMs
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