27 Structure of arrangements - Reliance on others The agreement between the adviser firm and the investor should explain clearly what each party is doing: • Roles and responsibilities Who is providing advice on the use of a discretionary management service and on what the client’s investment mandate should be (adviser) and who is providing the investment management service in accordance with the mandate set (DIM) • Suitability Responsibility for ensuring the advice to invest in the discretionary management solution and the mandate set is suitable (adviser) and responsibility for ensuring that decisions to trade for the investment mandate set are suitable (DIM) • Reporting Who is responsible for ensuring investors are provided with periodic reports and other relevant information Agreement between DIM and investor (discretionary management agreement) The agreement will set out how the DIM will provide its service to the underlying investor and, specifically, how the DIM will manage the client’s portfolio in accordance with the agreed investment mandate. Suitability obligations Adviser It is the responsibility of the adviser firm to ensure that the discretionary management proposition it recommends to investors is suitable. . A discretionary management arrangement may not be suitable for all clients – particularly those with limited knowledge and experience or characteristics of vulnerability. This suitability assessment needs to be undertaken at outset and on an ongoing basis (periodic assessment of suitability) where an ongoing service is provided to, and paid for by, the client. Discretionary Investment Manager DIMs have their own suitability obligations. The DIM needs to manage the investments in accordance with the mandate. It also needs to ensure that its decisions to trade are suitable and all transactions are consistent with the investment policy / strategy that has been agreed. It is only by managing the investment to the agreed mandate that the DIM can demonstrate that each trade is suitable. Chapter three - Structure of arrangements - Reliance on others
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