The Personal Investment Management and Financial Advice Association (Pimfa) has published a guide for advisers and discretionary investment managers (DIMs) to help them understand the different ways in which relationships between their firms can be structured.
The guide has been drafted by Threesixty Services, with input and collaboration from Pimfa and DFM Connect, a group of firms providing discretionary services to advisers and their underlying clients.
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” and “Reliance on Others”, taking account of the increasing role that platforms play in making third-party discretionary services available to advisers.
Purpose of the guide
The impact of the Retail Distribution Review (RDR), which introduced a ban on referral payments between advisers and DIMs, has also led to them to working more closely together in partnership rather than operating on a simple referral basis.
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; such as:
- 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 sets out the features of each, allowing firms to make informed decisions about which is likely to work best for their business and their clients in any given scenario.
It also seeks to give all parties, whether adviser firm, 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.
Tricky to interpret
Liz Field, chief executive of Pimfa, said: “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.”
Vanessa Johnson, head of compliance strategy at Threesixty Services, added: “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.”
