I was fortunate to spend some time in London earlier this year. Besides being reminded how empowering a fully functioning public transport system can be, I was privileged to engage with some of the best thinkers in the world. Not only investment thinkers, but thinkers from all fields of life – political, philosophical, statistical, mathematical, cultural, and even comical.

But it was the investment conversations that really intrigued me. It is very clear that most investment firms – regardless of their investment philosophies or whether they view the world from the ‘bottom-up’ or ‘top-down’ – believe that there are SUPER THEMES that will have an undeniable impact on the world and financial markets.

This is not a “Back to the Future” movie – we are living the future…

These themes have already started to rewire the entire global environment. While I was listening to many great minds sharing their ideas and views, a nagging thought persisted throughout my visit to the UK. How exactly do we manage the risks that these themes will inevitably bring, and on the flipside, how do we harness the rewards? While there is no single answer to this question, surely as investment managers and custodian of clients’ investment savings we have a responsibility to educate our clients on how these themes are considered when we invest and manage their investment savings?

Stay close to asset managers

While I know this ‘speaks to my book’, I just cannot see how one set of eyes – or even two for that matter – can comprehensively navigate a world with so much uncertainty, complexity and opportunity. As a Discretionary Fund Manager (DFM) we recognise the importance of staying close to the asset management industry. We need to understand how asset managers are organising themselves to deal with the these ‘super’ trends – how they make investments and ultimately grow clients’ capital. The challenge is understanding how sectors of the economy are going to change, and which companies are going to be successful as those changes manifest themselves. It is not an easy thing to succeed at.

Advisers wear multiple hats

I was reminded of the importance – and difficulty – of the job of a financial adviser and the role that we as DFMs must play to support them. While we allocate capital, monitor and assess the underlying asset managers, financial advisers have the important task of dealing with clients. They wear many hats, acting as financial planners, strategists, coaches, and at times, are even expected to be experts on SUPER THEMES. As a result we have seen a growing trend of advisers PARTNERING with DFMs to provide the wider range of services expected from their clients.

Partnership model – benefits and caveats

Reasons why the collaboration between financial advisers and DFMs can be a powerful move, follow below.

• Increased efficiency and focus
  
  
  • Time management Investment research, portfolio construction, and ongoing management are time-consuming tasks. Partnering with a DFM can free up an adviser’s time to focus on what they do best
  • building client relationships, developing financial plans, and providing holistic financial advice.
  • Expertise DFMs are investment specialists with dedicated research teams and access to a wider range of investment options. They can take the reins on portfolio management, allowing advisers to focus on the bigger financial picture.
    
    
• Enhanced client service
  
  
  • Improved investment outcomes DFMs have the resources and expertise to build diversified and strategically allocated portfolios. This can potentially lead to better risk management and stronger returns for clients.
  • Scalability DFMs can manage a larger number of accounts, allowing advisers to take on more clients and grow their practice.
  • Shared responsibility By partnering with a DFM, advisers can share the responsibility for investment decisions, which can be reassuring for both advisers and clients.
    
    
• Additional benefits
  
  
  • Compliance support DFMs are well-versed in regulatory requirements, freeing up advisers to focus on client relationships.
  • Access to resources DFMs can offer advisers access to advanced technology and research tools that might be outside their budget.
  • Reduced risk DFMs take on some of the investment risk, reducing the potential liability of advisers.

There are, however, some caveats to consider.

• Loss of control
  Advisers relinquish some (or all) control over the investment process when partnering with a DFM.
  
  
• Finding the right partner
  It is crucial to select a DFM with a strong track record, a compatible investment philosophy, and a commitment to client service.

Conclusion

Partnering with a DFM can be seen as a strategic move for financial advisers. It allows them to offer a more comprehensive service to their clients and frees them up to focus on the core aspects of financial planning. But finding the right partner can be tricky. Once an adviser has a trusted DFM partner, navigating this ‘Back to the Future’ world could be a lot less painful and hopefully, even enjoyable.