As part of this agreement, the advisor remains responsible for determining the adequacy of DFM`s mandate for the client, but the responsibility for the effective management of the investments rests with the DFM. If you rely on agreements with investment managers that have not been audited lately, it is worth taking the time to check them out. Before renewing your IP coverage, you need to fully understand the agreements you have and are confident that you have reduced unnecessary risks. When checking agreements, the following questions are useful for dealing with them: Another important aspect of due diligence at DFMs is to think about how you want to get a discretionary service for the client. If the advisor wishes to retain responsibility for the suitability, he must ensure that the DFM can support him through an appropriate client agreement. Some DFMs insist on doing part of the aptitude process if you go directly to them, which may not be the suggestion of the client of some IFAs. So make sure you have some thoughts on the main regulatory responsibilities, who does what, as part of the due diligence process. Professional liability insurance providers (PIIs) are beginning to ask specific questions about agreements made by consultants with discretionary fund managers. From the discussions I have had with consultants, it is clear that many are working within agreements that were reached years ago, and many of those agreements are based on the AAFC. It is worth it, here consultants who have signed an agent as a customer agreement, are exposed to all complaints from their clients regarding their investments, which may go as far as the future. You can find more information about AAFC agreements via PortfolioMetrix or on the Personal Finance Society paper, Agent as Client: What you need to know.
When consultants intervene as part of an agent as client agreement and act as a DFM client on behalf of the final investor, some have argued that only the advisor should be informed. They also ask if they are related to the agreements that consultants make with their clients. Let`s start with the word «discretionary.» It simply means that the manager makes purchase and sale decisions within a portfolio without seeking the customer`s permission or authorization.