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Word Of Mouth Is Strongest Route To Discretionary Wealth Managers For Advisors - UK Survey
Tom Burroughes
14 June 2016
A high proportion of wealth advisors rely on personal contacts when choosing a discretionary investment manager, while one in five never review existing relationships, suggesting considerable inertia, research from Diminimis, a UK research and consultancy firm, has found. Some 28 per cent of advisors rely on recommendations or personal contacts to select and review a DIM; 44 per cent rely on external research tools and one in five create their own questionnaire.
Data comes from research carried out in April and May this year; over 125 independent financial advisors responded.
More than half of advisors (56 per cent) use only one discretionary investment manager; around a third use two to three such entities (35 per cent). Just one in ten use four or more (10 per cent).
“There is an urgent need for an industry standard that is a robust, yet efficient way for advisors to be able to review, screen and select discretionary investment managers. This will hugely reduce business risk and minimise the time and effort spent on initial qualitative research and due diligence. The proportion that use just one discretionary management firm, rely on personal contacts and external research tools and never review existing relationships suggest this process is not well understood or is too complex and time consuming,” said David Gurr, founding director of Diminimis.
Some 17 per cent of respondents said they never review existing DIM relationships. Six in ten (59 per cent) review this annually; one in five (19 per cent) every six months, and just over one in 20 (6 per cent) every three years.
Increasing numbers of advisors now use DIMs, the survey said, at 57 per cent up from 51 per cent six months ago. More than three-quarters of advisors (78 per cent) expect their use of discretionary investment will increase or stay the same in the future, the survey found.
Diminimis partnered with the Personal Finance Society to produce the question sets.