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Personal Finance Society
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Saving time and effort in DIM due diligence

A standardised approach to due diligence

Last year the Personal Finance Society, in association with Diminimis, developed a good practice guide to Adviser Research & Due Diligence on Discretionary Investment Managers. There continues to be a lot of industry noise surrounding this topic and we felt that further clarity was important.


Recognising the significant investment of time necessary to gather detailed, quality information, work has been going on behind the scenes to develop a standardised question set to help ensure a consistent and effective due diligence process whilst saving both advisory firms and DIMs time and effort in the initial stages of due diligence. The Personal Finance Society assembled a practitioner panel that fed into the process led by experts from Diminimis. By using the same due diligence process systematically, advisers will be better equipped to make informed decisions ensuring all the costs, benefits, known and potential risks are assessed against the firm's pre-defined criteria.

Question Sets

Four individual question sets have been developed to reflect the broad operating frameworks available in the market (in which the advisers' and DIMs' service and obligations vary). Click below to view the question sets as PDF documents:

  1. Bespoke or Tailored Discretionary Investment Management Services
  2. Discretionary Managed or Model Portfolio Services (MPS) (Direct with adviser/client)
  3. Discretionary Managed Portfolio Services (MPS) Or Discretionary Model Portfolio Services (MPS) on External WRAP Platforms
  4. Discretionary Investment Management Services Provided on External Wrap Platforms (other than MPS Services)

Personal Finance Society members wishing to access these question sets in an editable Word Document format can do so by registering at http://www.diminimis.com/membership-area/ 

In addition members will be able to download an Adviser Guide and a Glossary of Terms and Abbreviations Used from this site.

DIM buy-in

Many Discretionary Investment Managers have been involved in the research process and those registering in advance have been provided with copies of the question sets.

There is strong recognition by the DIMs that a lot of time is wasted answering a wide range of questions, often with no idea why they have been asked or how they are going to be used. To be able to respond using a standardised approach in an efficient and consistent manner has the support of much of the DIM community.*

Benefits of a standardised approach to advisers/adviser firms include:

  • Confidence that they are asking the right questions from the outset to conduct desk based research;
  • Ability to analyse and compare the information received in a systematic manner against their pre-defined criteria;
  • Enabling the selection of a shortlist of potential DIMs that is the closest match to their requirements;
  • Highlighting topics to address with the shortlisted DIMs when they meet;
  • Highlighting potential issues to address when reviewing existing relationships with DIMs.

It goes without saying that information gathering in itself is not due diligence; it does not demonstrate knowledge or professionalism. The knowledge gained from the analysis needs to be interpreted and applied if it is to constitute a meaningful due diligence exercise. Blind negligence, where you have the information but have chosen to ignore it, leaves the adviser exposed.

I believe that by adopting a standardised approach, advisers will have a greater understanding of the controls and oversights they will need to have in place to manage the risks involved. I am grateful to the experts at Diminimis for the considerable time they have invested in developing these question sets. I very much hope they will evolve into a an industry standard to help both advisers and DIMs.

Best wishes,

Keith

*at a presentation to members of the WMA in April 2015 over 90% of attendees supported a standardised approach