After the introduction of consumer duty advisers’ satisfaction in the quality of literature of their discretionary fund managers dropped significantly.
Defaqto’s latest annual DFM Satisfaction Study found Tatton Investment Management is the most recommended by advisers, followed by Brooks Macdonald and Waverton Investment Management.
Alongside being the most recommended provider overall, Tatton also topped the list of preferred providers via a platform and for MPS direct custody.
Advisers picked Rathbone for bespoke DFM.
The study also measured how satisfied advisers have been with their preferred providers and identified where expectations are being met by cross-matching ranked importance with ranked satisfaction over the 14 categories.
‘Service’ was the category ranked most important for advisers, switching places with ‘quality of staff – investment’ which ranked first in last year’s study.
Fraser Donaldson, investment consultant at Defaqto, said: “Whilst many categories received similar satisfaction scores to last year, the worst performing categories were online facilities, provider brand, quality of literature, and remuneration, which saw an average drop in satisfaction scores of two percentage points.
“Quality of literature showed the biggest fall in satisfaction among advisers, which isn’t surprising considering the introduction of the consumer duty regulation and the need for clear and transparent communication.
"Broadly speaking, fewer than a third of advisers felt fully supported by their preferred DFM during this transition and the quality of literature is likely to be a contributing factor.
“The FCA is focusing heavily on this regulation and, if advisers feel the support they are getting is not sufficient to comply with consumer duty, then it is inevitable they will start to look elsewhere if things do not improve.”
The top fives, broken down
The top five preferred providers for MPS via a platform, were:
- Tatton Investment Management
- Waverton Investment Management
- RBC Brewin Dolphin
- AJ Bell
- LGT Wealth Management
The top five preferred providers for MPS direct, were:
- Tatton Investment Management
- Waverton Investment Management
- Rathbone Investment Management
- Quilter
- RBC Brewin Dolphin
The top 5 preferred providers for bespoke DFM, were:
- Rathbone Investment Management
- Brooks Macdonald
- Investec Wealth & Investment
- RBC Brewin Dolphin
- Quilter Cheviot
Popularity of MPS grows
This year’s study showed in 2023, the average DFM portfolio size grew.
For MPS through a platform it was £284,000, up from £228,000 in 2022, MPS direct custody with DFM was £277,000 from £221,000, while bespoke service averaged at £627,000 from £563,000.
Defaqto found more than two-thirds of advisers access an MPS via a platform with over half using MPS direct.
Fewer than half use a bespoke service but of those that do, 86 per cent also use an MPS, up from 75 per cent in 2022.
For the 14 per cent of bespoke investment service users who do not use an MPS, Defaqto said it is likely most will be using multi-asset funds or constructing portfolios, on an advisory basis, with single asset funds for clients where a bespoke investment proposition is not suitable.
Advisory business placed using single asset funds shrank over the past four years though, falling from 11 per cent in 2019 to just 4 per cent in 2023.
tara.o'connor@ft.com
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