PIMFA
6 April 2023
PIMFA welcomes updated guide on the structure of relationships between advice firms and Discretionary Investment Managers
PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, is pleased to announce publication of an updated guide for advice firms and Discretionary Investment Managers (DIMs) when structuring how they can work together.
In October 2021, threesixty services LLP, with input and collaboration from PIMFA and DFM Connect, a group of firms providing discretionary services to advisers and their underlying clients, drafted a guide on how the arrangements between advice firms and discretionary managers can be structured.
The paper set out how the relationships between adviser firms, their clients and DIMs could best be structured in line with the FCA rules on “Agent as Client” (COBS 2.4.3R) and “Reliance on Others” (COBS 2.4.4R). It highlighted the pros and cons and features of each model, allowing firms to make informed decisions about which is likely to work best for their business and their clients in any given scenario.
This guide has now been updated through a Consumer Duty lens. Firms may find it useful to consider this paper alongside another guide issued today that seeks to clarify manufacturer, distributor and co-manufacturer roles under the Consumer Duty.
The Consumer Duty aims to set higher and clearer standards of consumer protection across financial services. It requires firms to put their customers first and to evidence how they are doing this. To meet the Consumer Duty requirements, all firms need to show how they are putting their clients at the heart of their business, offering products and services that are fit for purpose and which they know represent fair value.
The Consumer Duty does not change the fundamental nature of how arrangements between advice firms and discretionary managers may be structured. However, each party to the arrangement will need to consider and ensure that it meets its own Consumer Duty obligations.
The Consumer Duty applies to firms dealing with retail clients. However, it also captures firms where there is no direct relationship between the firm and the underlying retail client, but where the firm is providing products and services into the retail client space. This is particularly relevant where advisers structure their arrangements with DIMs on the ‘agent as client’ basis. Firms must consider if there are retail customers at the end of the distribution chain and if they can determine or materially influence outcomes for them. Where this is the case, firms must comply with relevant aspects of the Consumer Duty.
Copies of the updated guide are available upon request from the threesixty services website, or by emailing threesixtyguides@threesixtyservices.co.uk.
Liz Field, Chief Executive of PIMFA, commented:
“With the Consumer Duty coming into effect in only a few short months, now is the right time for advisers and discretionary firms to consider how their relationships with each other and the way that responsibilities are divided between them work in the context of the Duty. I am pleased that PIMFA and DFM Connect have been able to work with threesixty services LLP to provide guidance that will help advisers and discretionary investment managers to meet the Consumer Duty’s key objective, namely, to ensure good outcomes for their clients.”
Vanessa Johnson, Head of Compliance Strategy at threesixty services, commented:
“It’s been a pleasure to work with PIMFA and DFM Connect in updating this guide. How arrangements between adviser firms and discretionary managers are structured remains a constant source of discussion. The Consumer Duty does not change the essence of how the arrangements are structured but it requires all firms to review their products and services and ensure that they meet the regulatory requirements.
“The key message of this updated guide has not changed. At the heart of these arrangements lies the client’s best interests. It’s therefore important each party understands the structure of the arrangements they set up and ensure their propositions meet the Consumer Duty outcomes.”
Sean Taylor, Chair of DFM Connect and Intermediary Development at Canaccord Genuity, commented:
“It is great to see the updated publication of this paper in light of the Consumer Duty focus that has inevitably raised many questions. This work has been the culmination of a collegiate and collaborative approach by all parties to an important issue in the DIM / Adviser space.
“To reiterate, there is no right or wrong answer to this matter, and relationship styles vary from client to client. What is important is that we all understand the risks and responsibilities of each relationship and have the appropriate agreements in place to match.
“I am particularly grateful to the DFM Connect member firms, threesixty services and PIMFA for the hard work and expertise they brought to this work.”.
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NOTES TO EDITORS
About PIMFA – the Personal Investment Management & Financial Advice Association
- PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
- The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
- PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
- PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
- PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
- Further information can be found at pimfa.co.uk
Contact
For further information on this release or other press matters please contact:
Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376
Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225
