Discretionary Fund Management
Discover how discretionary fund management can help you manage your investments in line with your financial goals. Understand the benefits, considerations and role of professional investment expertise in your wider financial plan.
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What is Discretionary Fund Management?
Discretionary Fund Management (DFM) is a service where you give a professional investment manager the authority to manage your investment portfolio on your behalf, making investment decisions within an agreed strategy and in line with your objectives, risk profile and investment preferences.
Rather than making individual investment decisions yourself, a discretionary fund manager monitors your portfolio and makes changes when they believe it is appropriate. This may include making adjustments in response to market conditions and, where relevant information has been provided, changes in your circumstances.
DFM can provide access to professional investment expertise and ongoing portfolio management, allowing your investments to be managed in line with your longer-term financial goals. It may be considered where an investor has a substantial investment portfolio, more complex financial circumstances, or prefers to delegate day-to-day investment decisions, although its suitability will depend on individual circumstances.
However, discretionary management is not suitable for everyone. Investment values can fall as well as rise, and you may get back less than you invest. There are also fees to consider, which can affect your overall returns.
How does Discretionary Fund Management work?
When you use a discretionary fund manager, the process typically begins with an assessment of your financial circumstances, investment objectives, attitude to risk and capacity for loss. This helps establish an investment strategy that reflects your individual needs.
Once the strategy has been agreed, your investment manager has the discretion to make investment decisions within the agreed mandate without seeking your approval for every individual transaction. They will monitor your portfolio, review its performance and make adjustments as needed.
The main features of discretionary fund management:
| Feature | What it means for you | |
|---|---|---|
| Professional investment management | An investment manager makes day-to-day investment decisions on your behalf. | |
| Personalised investment strategy | Your portfolio is managed in line with your objectives, risk profile and agreed preferences. | |
| Ongoing monitoring | Your investments are reviewed and adjusted as market conditions and/or your circumstances change. | |
| Portfolio diversification | Your investments can be spread across different asset classes, sectors and geographical regions to help manage risk. | |
| Delegated decision-making | You do not need to approve every transaction, provided decisions remain within the agreed mandate. | |
| Fees and charges | You pay for the management service, with costs varying between providers and arrangements. |
| Feature | Professional investment management | Personalised investment strategy | Ongoing monitoring | Portfolio diversification | Delegated decision-making | Fees and charges |
|---|---|---|---|---|---|---|
| What it means for you | An investment manager makes day-to-day investment decisions on your behalf. | Your portfolio is managed in line with your objectives, risk profile and agreed preferences. | Your investments are reviewed and adjusted as market conditions and/or your circumstances change. | Your investments can be spread across different asset classes, sectors and geographical regions to help manage risk. | You do not need to approve every transaction, provided decisions remain within the agreed mandate. | You pay for the management service, with costs varying between providers and arrangements. |
Although DFM offers professional oversight and convenience, it does not guarantee positive returns or protect you from all investment losses. It is important to understand the investment approach, level of risk and charges before proceeding.
Is Discretionary Fund Management right for me?
Discretionary fund management may be worth considering if you want professional support managing your investments, have limited time to oversee your portfolio or prefer to delegate investment decisions to an experienced manager.
It can also be appropriate if your financial affairs are more complex and you want your investments managed as part of a broader financial strategy. For example, you may be investing towards retirement, managing accumulated wealth or looking to preserve and grow your assets over the longer term.
However, DFM is not necessarily the right solution for everyone. If you prefer to make your own investment decisions, have a relatively straightforward portfolio or are looking to minimise costs, other investment options may be more suitable. You should also consider whether the benefits of a discretionary service justify the additional fees compared with alternatives.
The key considerations when deciding whether DFM could suit your needs:
| Consideration | Questions to ask yourself |
|---|---|
| Your investment goals | What are you investing for, and when will you need access to your money? |
| Your attitude to risk | How comfortable are you with fluctuations in investment values and the possibility of losses? |
| Your time and knowledge | Do you want to manage your investments yourself or delegate decisions to a professional? |
| Your portfolio | Would professional oversight and ongoing management add value to your current arrangements? |
| Costs | Are the management fees and other charges reasonable in relation to the service provided? |
| Your wider financial plan | How will DFM fit with your pensions, savings, tax planning and other financial commitments? |
| Consideration | Your investment goals | Your attitude to risk | Your time and knowledge | Your portfolio | Costs | Your wider financial plan |
|---|---|---|---|---|---|---|
| Questions to ask yourself | What are you investing for, and when will you need access to your money? | How comfortable are you with fluctuations in investment values and the possibility of losses? | Do you want to manage your investments yourself or delegate decisions to a professional? | Would professional oversight and ongoing management add value to your current arrangements? | Are the management fees and other charges reasonable in relation to the service provided? | How will DFM fit with your pensions, savings, tax planning and other financial commitments? |
How can financial advice help you make the right decision?
Choosing a discretionary fund manager is an important decision, and it is worth understanding how the service fits into your wider financial circumstances before committing.
Speaking to one of My Pension Expert’s advisers can help you make an informed decision. One of our advisers can assess your financial position, establish your investment objectives and help you understand your attitude to risk and capacity for loss. They can also explain the differences between discretionary management and other investment approaches, helping you weigh up the potential benefits against the costs.
One of our advisers can also help you assess whether a particular discretionary fund manager's investment philosophy, service and fee structure align with your needs. Where appropriate, they can help ensure that your investment strategy complements your wider financial plan, including retirement planning, tax considerations and your need for accessible savings.
Ultimately, discretionary fund management should be about more than delegating investment decisions. It should form part of a considered approach to achieving your financial objectives. By seeking advice tailored to your circumstances, you can make a more informed decision about whether DFM is right for you and how it could support your long-term financial plans.
