In the past, having someone to actively manage your wealth was viewed as a luxury reserved for the uber rich. Times are changing. Since the beginning of this century discretionary investment firms (‘DFMs’) have been using technology to drive economies of scale, opening this once mythical service to a much broader client base and thereby reducing its exclusivity.

From an adviser’s perspective, only their largest clients were deemed suited to a DFM service, with portfolios under the £100,000 mark allocated to off-the-shelf fund-of-funds solutions. This is because the costs involved in setting up and managing a tailored portfolio were historically considered prohibitive below a certain threshold – or the DFM simply wasn’t interest in that size portfolio (hence the perceived exclusivity).

However, things have changed. DFM is losing its exclusivity and this something we want to celebrate and actively encourage here at DISCUS.

The democratisation of wealth management

Investment manager RC Brown has long been, and still is, pioneering the democratisation of wealth management. Instead of solely targeting the top clients of an advice firm, RC Brown can set up and run portfolios for clients with a minimum investment of just £15,000.

And I’m not talking about a Managed Portfolio Service (MPS) on a platform. As we are all aware too from the daily financial press, that particular strain of portfolio management is light on service from the DFM to the adviser and client. What I’m talking about here is a proper service-focused solution, where ALL clients and advisers have direct access to the Investment Manager making daily decisions on their portfolio.

“We work with all types of advisers and their clients, really anyone who has some money that needs careful management. While most DFMs deem any client with a portfolio of less than £0.5 million to be “low value” and therefore not worthy of direct access to the Investment Manager, this is the area of the market that RC Brown has been set up to support.”
Robert Clark, RC Brown’s Sales and Marketing Director

The firm’s philosophy centres around the view that today’s £50,000 portfolio could end up tomorrow’s £5 million case and this strategy enables them to build stronger relationships with their adviser partners. The don’t believe in focusing on delivering service with an element of exclusivity, which then limits the overall pool of clients they can support.

Robert added:

“We don’t believe the benefits of discretionary management should be limited to the very few at the top end of a financial adviser’s book. We often start off by managing current and previous ISA contributions, which many of the traditional players would shy away from. Once the financial adviser and their clients are comfortable with how we operate, we then get asked to take on SIPPs and other ‘family money’ – some of which may also be new to the adviser.”

How RC Brown have made DFM accessible

In 2010, the management team at RC Brown decided to take the business in a different direction. Rather than focusing on a small number of big cases, where client loss has the potential to damage the broader business, they completely reshaped their thinking and made the financial adviser market their core focus.

As a result, they streamlined systems and processes to create operational efficiencies and scale. This enables the business to handle a much larger volume of cases and makes its services far more accessible.

Robert explained:

“Rather than having to trade each portfolio individually, we have created a process that is asset driven. When a decision has been taken on the respective share or fund, we press the button once and that trade is applied to all appropriate portfolios. If we have clients with ethical considerations or requested exclusions they are already flagged in the system, so won’t participate. Automation sounds obvious, but unfortunately it is still very rare in our industry.”

What’s more, RC Brown provides MiFID II compliant all-in charges, with an annual management fee that can be as low as 0.4%. The firm’s charges are designed to meet the needs of MiFID II because there are no additional costs, such as transaction fees.

If you have read our content before, you will know that the team at RC Brown are vocal supporters of full disclosure for fees. They are proving this stance through the development of a “Costs and Charges Calculator tool” which will soon be available on their website. This tool will enable advisers and their clients to see in real terms (£ value) what the expected costs are, including VAT.

Could more DFMs follow suit?

Today is the age of the robo-adviser and we have seen many DFMs make their investment propositions more accessible via MPS, either on or off platform. This is because technology and systems continue to improve, which should make it easier for DFMs to manage smaller portfolios efficiently – but at the expense of a direct relationship with those making the decisions.

Close to three quarters of advisers surveyed by Nucleus for the ‘2018 Census’ use a DFM solution for less than 20% of their client bank. This suggests there is a huge opportunity for DFMs who are able to create relevant and cost-effective solutions for mass-affluent clients. However, the key difference between them and providers like RC Brown is likely to be the associated service delivery.

We welcome your comments and feedback, please add them in the space below.


This article was created for the DISCUS website by Robert Clark of RC Brown. To find out more about RC Brown please visit their dedicated page here or run a comparison with other DFMs using our Compare tool.