A discretionary fund manager, usually shortened to DFM, manages portfolios under a mandate. The word doing the work there is discretionary: rather than your advisor coming to you for approval on every fund change, the DFM can select, combine and rebalance investments within agreed limits.
That can be genuinely valuable. It brings specialist research, governance, and portfolio changes that happen consistently rather than whenever someone gets round to it. It also adds another participant, and potentially another fee, to the chain.
Which makes the division of labour worth understanding. Your advisor still has responsibilities for understanding your needs and recommending a suitable overall solution. The DFM manages the delegated portfolio decisions set out in its mandate. The platform and the underlying fund managers perform different roles again.
So ask whether the DFM is optional, what authority it receives, how portfolios are selected and how the arrangement is monitored. Ask too whether the advisor or firm has an ownership, referral or remuneration relationship with it, because that is the sort of thing you want stated rather than discovered.
Try this now
Draw one line from you to your advisor, the platform, the DFM and the underlying funds. Beside each, write its job and its annual cost. If two parties look like they are doing the same job, ask for the distinction.
Ask your advisor
- What decisions may the DFM make without asking me?
- What fee does it charge, and what does that add beyond the underlying funds?
- How was this DFM selected and how are conflicts managed?
Delegation can be useful, but it should never make responsibility or cost harder to see.