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Aim Two Three

Discretionary Fund Management

There has been a considerable increase in the number of financial advisers who outsource investment management to Discretionary Fund Managers (DFMs) (also referred to as discretionary Investment Managers (DIMs)) in recent years and the Aim Two Three Big Survey undertaken at the end of 2014 shows that this trend is set to continue.

Referring clients to a DFM does not (in a vast majority of cases) impact on ‘Independence’ as the DFM/DIM is a service rater than a product.  However, the FCA (in TR14/5 - and referring to FG 12/15) states that "... The firm should undertake sufficient due diligence on a DIM before recommending it, so it can make a judgement about whether it is the right solution for the client."

Undertaking due diligence of DFM services has never been an easy thing to do.

Like for like comparisons are difficult and it can be very time consuming to get due diligence information (other than the in-house packs which DFMs are always happy to provide).

These, and other difficulties contribute to the FCA’s TR 15/5 findings which show that due diligence on DFMs is not always completed to a satisfactory level.  This is not only an issue for new DFM relationships, an example of ‘poor practice’ included in TR 14/15 relates to the continuing use of a DFM (DIM) over a period of years with no ongoing due diligence being undertaken.

In TR 15/15, the FCA identifies 3 key recommendations for clients in relation to discretionary investment services:

  • Have you considered a wide range of discretionary investment management service providers?
  • Do you have processes in place to ensure your advisers do not restrict their advise to discretionary investment services, or recommended them without considering the needs and circumstances of the individual client?
  • Each time a discretionary investment service has been recommended, would it be clear that the advise was in the individual client’s best interests in light of other investment solutions available in the market?

The DFM Short List Generator, supplied to subscribers to our Support Hub service, is designed to assist firms with ensuring that they can answer the first of these three points appropriately.

For more details on our Support Hub service click here

Frequently Asked Questions

Is the Aim Two Three DFM Short List Generator a due diligence system?

No! We do not believe that any such system can undertake due diligence for you.

Due diligence involves a firm reaching its own opinion, using its expertise, based on an analysis of the market.  Firms can rely on third parties (such as Aim Two Three or DFMs themselves) for factual information but not for opinion.

How does the information get on to the system?

We provide each DFM with a unique link to the system.  They can then give their answers to an extremely comprehensive range of questions, once their in-house compliance team is happy with the answers they submit them to Aim Two Three.

Aim Two Three reviews the answers simply to ensure that (a) all questions have been answered where appropriate, we try to keep the number of ‘N/A’ type answers to an absolute minimum and (b) that the answers are in the appropriate format for the questions.  We do not review the answers for accuracy, that is the responsibility of the DFM.

Once all is in order, the data is automatically published to the system.  There is no re-typing involved, the system shows exactly what the DFM has typed in.

Are DFMs charged for placing their information on the system?

No.  We believe that it is important in (a) providing the widest possible range of DFM information and (b) preserving our independence that there should be no charge for placing information on the system.

Whilst the questionnaire is admittedly comprehensive and can take some time to complete, the absence of a charge should mean that only DFMs who do not want their details compared will not submit them.

Is the short list generator ‘whole of market’ or a ‘panel’?

It is intended to be whole of market.  It is absolutely not a panel, we have no criteria for inclusion of a DFM on the Generator beyond their willingness to be included.

It is certainly free from bias as we have no restrictions on the DFMs which can be listed.  We have a fairly large number of DFMs on the generator already and this is increasing all the time.  When asked to do so by subscribers to our service we contact additional DFMs to ask them to submit their details as well.

This means that more DFMs appear on the system all the time.

How much does the short list generator cost?

The Aim Two Three Short List Generator is supplied to all subscribers to our Support Hub service free of any additional charge which means that the effective cost is just £280 pa. 

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