The positive performance of DFM over time

The immediate impact of adopting a discretionary fund manager (DFM) on adviser businesses and clients is now clear to see as a result of the Value of DFM report, but what do we know about the effect over the long-term?

Abstract staircase image

While the report enabled us to examine the benefits of adoption on advisers for the first time, there remained another gap in knowledge to address – how adviser businesses were affected over time and what advantages did it offer.

By digging deeper into the results of the survey of 100 advisers we found one clear message, that the benefits of a DFM to an adviser are in no way short-lived.

To examine the impact over time, the survey broke down the results into two groups, those that had used a third-party for more than six years – a group we have dubbed the ‘early adopters’ – and those that took on a third-party between one and five years ago – the ‘recent adopters’.

The results reinforced the view that handing over investment management to an external party and freeing up adviser time has significant long-term benefits for all aspects of the business and its clients.

Early adopters were shown to have, on average, around 21% more clients than more recent adopters and also reported a greater number of clients with more than £500,000 of assets (35% against 29%). As a result, early adopters reported a greater level of satisfaction with the composition of their client base. 83% said they were happy with the wealth of their clients against 73% of more recent adopters. A clear increase as time goes by.

With less time spent on managing investment pots, all advisers that had adopted a third party manager said they spent more of their working week meeting existing clients. However, early adopters were able to spend even more time with existing clients than more recent adopters – suggesting the advantages here are only amplified over time.

In previous posts we have revealed the vast improvements in investment performance reported by 72% of all advisers surveyed, with 81% of advisers saying performance was the most important factor they considered when looking to adopt a DFM in the first place. Yet, again by splitting the survey into early and recent adopters, we find the benefits of enlisting a DFM in terms of improvement to performance grow over the years.

Around 80% of early adopters felt the investment performance of clients had improved, against 65% of recent adopters that felt the same. Early adopters were also more likely to believe the risk/return profile of clients had improved.

This trend is mirrored across every aspect the advisers were quizzed about.

Quality of client contact and trust continued to improve in the years following adoption of a DFM, suggesting the benefits of the structure become clearer and more tangible over a longer time period.

More early adopters also reported improved contact with clients and felt a greater level of trust with them.

Importantly, nearly 10% more early adopters than recent adopters said they believed revenues from existing clients had increased as a result of their being able to spend more time with them.

Increased trust, contact and improved investment performance all translates into higher revenue and a broader, wealthier client base for advisers, and again the benefits appeared to increase the longer an adviser had partnered with a DFM for. Early adopters even received greater salaries around 17% and 13% higher than recent adopters in 2016 and 2017 respectively.

While the benefits of adoption to adviser business models are clear regardless of when they were adopted - something we can only analyse for the first time thanks to the Value of DFM report’s findings - it is by digging into the survey results we can find the benefits only increase with time.

The journey from first introducing a DFM to an adviser’s business to reaping the rewards of the structure can take some time, not all benefits will be clear to see in the initial days, but what the survey offered is an in-depth look at how those benefits continue to impact adviser businesses further down the line. Better yet, those benefits appear to only amplify as time goes by. 

Download the second chapter of our DFM research report - The value of discretionary fund management.


Important legal information

This area of the site is for professional advisers

Please read this page before proceeding, it explains certain legal and regulatory restrictions applicable to the distribution of this information. It is your responsibility to inform yourselves of and to observe all applicable laws and regulations of the relevant jurisdiction.

This section of the website is directed only at investment advisers and other financial intermediaries who are authorised and regulated by the Financial Conduct Authority (FCA).

The information provided in this site is directed at UK investment advisers only and must not be circulated to private clients or to the general public. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

I confirm that I am an investment intermediary authorised and regulated by the Financial Conduct Authority. I have read and understood the legal information and risk warnings below:

Important Information (Terms and Conditions)

The information contained on this site is believed to be accurate at the date of publication but no warranty of accuracy is given and the information is subject to change without notice. Any opinions or estimates included herein constitute a judgement as of the date of publication and are subject to change without notice. Furthermore, no responsibility is accepted for the accuracy of any information contained within sites provided by third parties that may have links to or from our pages.

Rathbone Investment Management Limited ("RIM") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered Office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW. Registered in England No 01448919.

In accordance with regulations, all electronic communications and telephone calls between Rathbones and its clients are recorded and stored for a minimum period of six months.

The information provided in this site is directed at UK investors only. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

In particular, the information herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in France and the United States of America to or for the benefit of United States persons (being resident in the United States of America or partnerships or corporations organised under the laws of the United States of America or any state, territory or possession thereof).

In order to comply with money laundering and other regulations, additional documentation for identification purposes may be required.

Rathbones shall have no liability for any data transmission errors such as data loss, damage or alteration of any kind including, but not limited to, any direct, indirect or consequential damage arising out of the use of services provided or referred to in this website.

Past performance should not be seen as an indication of future performance.

The value of investments and the income from them can fall as well as rise and you may not get back the amount originally invested, particularly if your client does not continue with the investment over the longer term.

Changes in the rate of exchange between currencies may cause the value of an investment to go up or down.

Interest rate fluctuations are likely to affect the capital value of investments within bond funds. When long term interest rates rise the capital value of units is likely to fall and vice versa. The effect will be more apparent on funds that invest significantly in long dated securities. The value of capital and income will fluctuate as interest rates and credit ratings of the issuing companies change.

Tax levels and reliefs are those currently applicable and may change and the value of any tax advantage will depend on individual circumstances.

Investing in emerging markets or small companies may be potentially volatile, as these investments are high risk.

The design, text and images are owned, except as expressly stated by members of the Rathbone Group. They may not be copied, transmitted, displayed, performed, distributed, licensed, altered, framed, stored or otherwise used in whole or in part or in any manner without the written consent of Rathbones except to the extent permitted and under the procedures specified in the copyright Designs and Patents Act 1988, as amended and then only with notices of Rathbones' rights.

Rate this page:
Average: 5 (1 vote)

Subscribe to the In the KNOW blog email