This is one of the softer issues, but in the long term perhaps one of the most important, after suitability of solution. Outsourcing to a DFM, if you get it right, should be viewed as a long-term partnership.
Changing a DFM may involve many clients, considerable amounts of assets and a lot of costly administration for both adviser and client. Defaqto rarely presents a finished research panel to the adviser. Instead, it supplies a shortlist and encourages the adviser firm to engage with the DFMs, testing them to see what future relationships may be like.
If the DFM performs to expectations, then the adviser can expect a lengthy, smooth running partnership.
After masses of due diligence and a lengthy selection process, terms of exit can often be the furthest from an adviser’s mind. However, all clients will eventually leave the service – granted that in some cases this could be several generations in the future.
Always check on what other services the DFM specialises in. It may not be at the forefront of due diligence now, but it may be worth noting for future client requirements.
It is sometimes easy to miss the obvious and a bit of revision to help with due diligence processes is never a bad thing.
Fraser Donaldson is insight analyst (investments) at Defaqto
