With the aim of ensuring fair outcomes for financial customers, South African regulators are advocating for a greater separation of financial advisory and investment management activities. Consequently, financial advisors are increasingly partnering with Discretionary Fund Managers (DFM).
DFM services are not only useful to advisors for their retail clients — they’re also an excellent solution for advisors with institutional clients like retirement funds. Every retirement fund is unique, with a distinct member profile and benefit regime that often requires a customised investment strategy. Institutional DFM services focusing on retirement funds allows advisors to provide appropriate advice to their clients leading to better outcomes for retirement fund members.
An institutional DFM offers a single, integrated service tailored to advisors with retirement fund clients that includes strategic and active investment management, while removing the routine hassles of administration, reporting and governance. It provides the investment expertise ordinarily only available to large retirement funds, and requires a different skillset than that of a retail DFM providing the same service to individuals.
With an institutional DFM, the process begins with a thorough analysis of the retirement fund’s needs and goals. In conjunction with the advisor, an investment strategy for the client is developed and an Investment Policy Statement formulated.
Advisors can provide clients a solution whereby the often difficult and time-consuming task of choosing, managing and monitoring asset managers is delegated to the institutional DFM, which implements the investment strategy by investing the retirement fund’s assets into a managed portfolio of investment products.
Ongoing portfolio management decisions can be made by the institutional DFM on a discretionary basis and executed promptly to optimise performance and manage risk effectively. The daily monitoring and management of a client’s portfolio by a coordinated team of multi-disciplinary professionals provides the advisor and their retirement fund clients peace of mind that their assets are invested with care.
The institutional DFM provides the advisor with a comprehensive toolkit that the enabled them to engage productively with their clients. The toolkit includes market insights and portfolio positioning, and risk and performance reporting. Additionally, retirement fund clients are provided with a suite of reporting services including investment accounting and regulatory reporting to cater for their auditing and statutory compliance needs.
With an institutional DFM, economies of scale apply, such as being able to negotiate better fees with investment managers. This enables the institutional DFM to charge for all the above services, inclusive of asset manager fees at a highly competitive rate.
By partnering with an institutional DFM, advisors are empowered to service their institutional clients professionally, offering expert solutions that benefit advisors, retirement funds, ultimately retirement fund members.
– David Potgieter
Delegated Investment Services, RisCura
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