But a recent report by Asset Risk Consultants sent a stark warning to advisers – that most discretionary managers have underperformed.

The report compared discretionary fund performance with that of the basic FTSE Apcims asset allocation models. It found that if investors had simply passively followed the FTSE Apcims models for a three-year time period, they would have enjoyed performance similar to that of the top 10 per cent of discretionary managers.

This should be a cause for concern among the adviser community, and a reminder that simply forming a ‘default’ arrangement with one discretionary management does not cut the mustard.

A similar message was issued by the FSA towards the end of last year when it said that advisers using discretionary managers must be able to demonstrate that they have put the needs of their clients ahead of any introductory fee offered by a discretionary fund manager (DFM).

Fraser Donaldson, insight analyst for funds at Defaqto, claims: “The responsibility of choosing the correct outsourcing manager lies with the adviser and good due diligence and ongoing monitoring processes need to be in place, even though overall there will still be a reduction in resources required.”

There are other concerns for advisers to consider, such as VAT, for example.

It is still unclear exactly what position adviser businesses and DFMs are in when it comes to VAT charging, with HMRC not expected to provide clarity until at least April this year.

Industry commentators have been voicing their concerns on the VAT issue, with Whitechurch Securities investment manager Ben Willis suggesting that the lack of clarity will put advisers off using the services of a DFM.

“From an adviser perspective, if they advise a client on a retail investment product then this could be more attractive as it is not subject to VAT. Some DFM charges are subject to VAT so this could deter advisers and clients from going down the DFM route due to expense, even if the DFM route was a suitable solution for the client,” he says on page 10.

It remains to be seen how this, as well as the issue of adviser kickbacks and legacy payments which is tackled on page 18, will affect adviser use of DFMs. We could very well see an about-turn in the current pro-DFM trajectory later this year.

Jenny Lowe is features editor at Investment Adviser