Results from a recent survey of FE adviser clients found that more than half of advisers (52 per cent) only use a single model portfolio service provider – despite the boom in model portfolios and providers since the implementation of the Retail Distribution Review, with advisers turning to DFMs (discretionary fund managers) to assist with managing clients' assets.
Surprisingly, the results of the survey also found that only 35 per cent of the advisers surveyed use between two and four model portfolio service providers, while only 13 per cent used model portfolio options from more than five providers.
One of the key reasons given when prompted as to why so few used multiple providers when comparing portfolios, advisers reported back that a lack of transparency and sufficient holdings information made comparing multiple providers difficult and extremely time-consuming.
The DFM market continues to come under fire for lack of transparency and openness, with another report published recently on the industry also highlighting the need for change to promote transparency and highlighting the growing need for DFM model portfolio comparison tools like FE Transmission.
Mika-John Southworth, director at FE says: “The DFM industry remains open to criticism about its opaqueness, although there is a growing recognition amongst the most customer facing DFMs regarding the need for greater transparency. The launch of our campaign based around DFM data in FE Analytics last year, has started to close the gap, but there is much more that needs to be done, and there is a need for more urgency – ultimately it is the end consumer who is going to suffer otherwise.
“With 16 of the UK’s main Model Providers now actively and openly sharing their data and underlying holdings information with advisers, they are really leading the way in terms of championing transparency. There is still more to be done in the indusrty as a whole however to improve transparency – take for example, between 10% and 14% of unit trusts and OEICs still don’t report an OCF or TER on FE Analytics. This needs to change.”
FE Transmission is a service which forms part of FE Analytics…. Which allows advisers to compare and carry out due diligence on the model portfolio service providers they use,. . FE Transmission’s main aim is to help advisers meet the FCA's increasing transparency and due diligence requirements.
Currently it offers 16 leading DFMs on the service – including Rowan Dartington, Thesis, Vestra Wealth, and London & Capital. FE Transmission also offers data automation, document management, communications, administration and a DFM directory for advisers.
Southworth adds: “With nearly 70% of the adviser marketplace (according to our recent survey) using a third party Model Portfolio Provider for part of their proposition, it remains a competitive marketplace for DFMs and Model Providers in which differentiating their proposition and demonstrating value to IFAs becomes more and more important. Gone are the days when providers can get away with a lack of transparency and information provision in support of advisers, who need to demonstrate robust research and client suitability to the regulator.”
Lawrence Cook, Business Development Director at Thesis Asset Management, says: “We were delighted to work with FE at the launch of FE Transmission on FE Analytics, which we believe improves transparency and openness for IFAs.
“The trend for advisers to use discretionary managers is matched by the demand for portfolio comparison and analytics tools. FE Transmission helps advisers access the tools to compare like with like, so they can understand the risk that lies behind returns.”