DFMs need compulsory reporting standards to aid advisers

Industry experts have called for compulsory reporting standards on discretionary fund managers (DFM) to help advisers make direct comparisons between them.

A report by financial consultancy firm MRM has stated that DFMs should use the same illustrative portfolio values and disclose transaction costs within funds.

Most currently use a blend of qualitative and quantitative factors but the lack of standardised data published by DFMs means advisers risk inadvertently straying from agreed client objectives.

Although there are a number of third party providers that offer comprehensive data for DFMs, not all firms are subscribed to these, making the initial due diligence process difficult according to the report.

However, the panel of industry figures that MRM gathered together did not agree subscription to these third party providers should be mandatory, believing this would adversely affect competition and innovation in the sector.

Gillian Hepburn, director at investment research firm Discus said that while better ways of comparing charges and performance would help, they are usually not the only factors when it comes to identifying the most suitable proposition for a client. She is calling for a standardisation of the disclosure of costs within funds.

There was a mix of views within the panel, for instance Paul Miles, principal by Silverback Consultancy, which offers advice to financial advisory firms, said: “In my view, the risk mapping should be carried out by the DFM and not paid for by the DFM to a risk mapping provider.”

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