The guide has been drafted by 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. The guide is informed by, and builds on, previous work carried out by the Personal Finance Society and also picks up on a wide range of queries and concerns raised by adviser firms.
The paper deals with how the relationships between adviser firms, their clients and DIMs can 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), taking account of the increasing role that platforms play in making third-party discretionary services available to advisers. The impact of the Retail Distribution Review, which introduced a ban on referral payments between advisers and DIMs, has also led to advisers and DIMs working more closely together in partnership rather than operating on a simple referral basis.
The rules themselves determine the nature of the contractual links between adviser firms, their clients and DIMs and following on from that, which party ends up owing which regulatory responsibilities to end clients. The purpose of the guide is to outline what the adoption of the Agent as Client or the Reliance on Others model means for advisers, DIMs and their clients in practical terms – Who undertakes which activities? Who owes which obligations to the client? What documentation is required? What needs to be made clear to the client?
The guide highlights that there are pros and cons to both the Agent as Client and Reliance on Others models and does not seek to drive advisers or DIMs into favouring one route above the other – rather, it sets out the 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. The guide seeks to give all parties, whether adviser firm or DIM or platform, a steer as to how best to structure their relationships, while continuing to ensure that the client’s best interests drive decision making and that there is clear agreement and disclosure between the various parties over roles and responsibilities.
Liz Field, Chief Executive of PIMFA, commented: “The Agent as Client and Reliance on Others rules have always been tricky to interpret and apply but it is important for advisers and discretionary firms to get this right, both for their own sake and, more crucially, for their clients. I’m pleased PIMFA and DFM Connect have been able to work with threesixty services to produce this guide for advisers, helping them in the future to structure their relationships with discretionary investment managers in such a way that it is clear to everyone, including the client, what each party’s roles and responsibilities are.”
Vanessa Johnson, Head of Compliance Strategy at threesixty services, commented: “It’s been a pleasure to work with a number of industry partners on this critical issue for financial adviser firms who are recommending the services of discretionary investment managers. Relationships between adviser firms and discretionary managers can be structured in different ways.
“This guide sets out the various options and identifies the respective pros and cons. 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. We hope this guide provides some welcome clarity.”
Sean Taylor, Chair of DFM Connect and Head of UK Intermediary Sales at Canaccord Genuity WM, commented: “I’m very pleased to see the publication of this paper, which has been the culmination of a collegiate and collaborative approach by all parties to an important issue in the DIM / Adviser space.
“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.”
Mark Hutchinson, Membership Director for the Personal Finance Society, commented: “Any guidance which supports advisers in achieving the right consumer outcomes by understanding the often-complex obligation and risk interdependencies inherent in these relationships is clearly welcome.”
Copies of this guide are available upon request from the threesixty services website
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