11th February 2020
There has been a lot of discussion in the industry recently about the number of different contractual relationships between IFAs, Discretionary Investment Managers (DIMs) and Clients. There has been rising concern amongst IFA’s in the use of “Agent as Client” framework used by some DFMs.
This appears to have been prompted by PI insurers recently adding “agent as client” related questions to proposal forms. The reason for this appears to be the potential liability to an adviser in relation to suitability of underlying investment fund choice, responsibility for reporting 10% falls and systems and controls to fulfil any additional duties.
We can confirm that Whitechurch operates on an “Agent of Client” basis which is described as a “Hybrid DIM [that] relies upon the client information and assessment by the adviser” in the PFS Good Practice Guide, 2017. This limits our direct relationship with clients allowing us only to manage relevant portfolios whilst the Adviser remains responsible for establishing which model portfolio is suitable, explaining risks and maintaining overall relationships with clients. Full details can be found in your Agency Agreements.
With the range of contractually different ways relationships can be set up, the most important thing is to gain clarity on who is responsible for doing what and what each party’s obligations are. The PFS carried out a significant amount of work in this area and produced the Good Practice Guide to help clarify the different options available to IFAs when recommending DFMs to their clients.
To find out more please visit https://www.thepfs.org/media/7658968/good-practice-guide_dim-addendum.pdf