5 Relationships between advisers and DIMs In October 2021 threesixty services LLP, DFM Connect and PIMFA jointly published a paper to remind firms how arrangements between advisers and DIMs can be structured and to highlight some of the pros and cons of each option. This paper has been reviewed and updated taking into account the Consumer Duty rules. More detailed information about how the Consumer Duty impacts advisers and DIMs can be found on the websites of both threesixty services LLP and PIMFA. Background In June 2019, The Personal Finance Society (PFS) in conjunction with Diminimis published a guide called ‘Agent as Client: What you need to know’. This identified important issues for advisers to consider when setting up relationships with Discretionary Investment Managers (DIMs). In response to this paper, in October 2019, threesixty services LLP published its own guide to show how relationships between advisers and DIMs can be structured. The best way to structure arrangements between adviser firms and DIMs remains an important area for debate, particularly where advisers recommend Model Portfolio Services (MPS) hosted on platforms. Where a DIM makes their MPS available on third party platforms, the DIM is likely to have no knowledge of the underlying client (investor), with the result that these arrangements are typically structured on the ‘agent as client’ basis. There remains significant growth in this marketplace. Under the Consumer Duty, adviser firms and DIMs need to be able to show how, in structuring the arrangements in the way in which they do, the four Consumer Duty outcomes are met. There remains no right or wrong answer on how relationships between advisers and DIMs are structured. It is up to adviser firms to decide how best to structure arrangements with their clients, including relationships with any DIMs they invite to assist in the delivery of services to their clients. At the heart of this issue lie the client’s best interests, ensuring customers are treated fairly, and the four Consumer Duty outcomes. Both DIMs and adviser firms need to consider how the ultimate outcomes are met for investors when setting up these relationships. Advisers can work with DIMs in many different ways. Traditionally, advisers would refer a client to a DIM and the DIM would take full responsibility for all aspects of the client take-on process, including full Know Your Client (KYC) information and associated assessments. However, the Retail Distribution Review (RDR) introduced a ban on referral payments between advisers and DIMs which has led to advisers and DIMs working more closely together in partnership rather than operating on a simple referral basis. Chapter one - Relationships between advisers and DIMs
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