8 Relationships between advisers and DIMs Regulatory background on structure of the arrangements between adviser firms and DIMs The FCA rules allow for two distinct types of relationship: 1. Agent as client 2. Reliance on others The FCA rules in COBS 2.4.3R (Agent as client) and COBS 2.4.4R (Reliance on other investment firms) cover scenarios where more than one party is involved in the delivery of a service to an investor. The rules allow the relationships between advisers and DIMs to be set up on different bases, provided certain conditions are met. These rules do not cover straightforward referrals of business from advisers to DIMs. In the agent as client scenario (COBS 2.4.3R), if a firm (DIM) is aware that a person (adviser firm) to whom it is providing services is acting as agent for another person (investor) the DIM can treat the adviser firm as its client. In the reliance on others scenario (COBS 2.4.4R), the DIM treats the end investor as its client but can rely on the adviser firm for information and for the recommendation of the investment mandate. We explain these arrangements and their implications in more detail in Chapters 2 and 3. The structure of the arrangements between adviser firms and DIMs affects advisers, DIMs and investors in different ways. There are pros and cons of each option. The key point is that all parties – adviser, DIM, investor (and platform, if used) – understand: • How the arrangements are structured • Their respective responsibilities • The risks / implications of the structure for each party and ensure that these are communicated clearly to investors The fundamental concern for all parties must be securing the best outcome for investors. A firm must act honestly, fairly and professionally in accordance with the best interests of its client (COBS 2.1.1R, the client’s best interests rule). It must also ensure it meets the four Consumer Duty outcomes. Each party - DIM and adviser - will need to be able to show how they are delivering on these key requirements. The structure of the arrangements between advisers and DIMs is a key consideration for advisers when looking at discretionary management propositions - but it is only one part of the equation. The overriding consideration must be that the discretionary management solution being recommended meets the needs, objectives and risk profile of the adviser’s clients. Chapter one - Relationships between advisers and DIMs
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