Agent as Client for DIMs and changing DIMs

Wildparaplanner

Hi all,

Has anyone or their firm gone through a process of "sacking" a Discretionary Investment Manager (DIM) under an "agent as client" agreement and moving to a different DIM, most likely as part of upgrading their centralised investment proposition?

If so, what challenges did you or the firm encounter?
Did the firm bulk switch all clients from one portfolio to an equivalent suitable portfolio?
Did they do this on a phased basis (e.g. changing only at annual review)?
What were the main compliance points that need to be covered?

Looking forward to hearing some thoughts and views on this.

Thanks

Wildparaplanner

Update on this. The firm is currently intending to go down a negative affirmation route to move all clients in a legacy CIP into the latest CIP.

Personally, I don't see much issue with this route, however there is a bit of back and forth going on in the office around whether it is the right approach.

Some say it should be a fully advised process (perhaps at annual review or sooner), while others think it doesn't need to be due to the "agent as client" position. In other words, the DIM isn't providing a service to the client, they are providing a service to the company.

I tend to agree with the latter, but curious to know what others think.

Nath

We have gone through this process over the past 18 months or so gradually moving clients over (where acceptable). We weren't sacking the old DIM, just adding our own white labelled portfolios run by another DIM (again agent as client) and moving over at the correct point for each client. Our network certainly wouldn't let us move everyone on mass and we have been having to do full advice at each review with full performance/cost comparison and pros/cons. Yes its shorter than a full suitability report but still a full advised report regardless for a strategy switch.
I agree it should be fully advised regardless of the agent as client position. The client should be aware of the changes and costs that will personally affect them. How could you do that without and show MiFID items required %/£ etc.
I appreciate what they are saying though about the agent as client position, but we wanted our clients to be aware specifically of their costs and charges differences.

Nath

I suppose it comes down to what your client agreement allows you to do and what the client has signed up to. If it allows you to replace a DIM then maybe okay, but we just wanted to let our clients know and speak to them about it, disclosing costs fully.

Wildparaplanner

I think the cost comparison is there (albeit not sure if it's personalised as haven't seen it) - i.e. your existing portfolio is X%pa and your new portfolio will be Y%pa - tick the box if you want to proceed or tick the box if you want to review other options with your adviser. I think at a higher level they have approved appropriately mapped portfolios accordingly based on objective of the portfolio and risk level. They might be needing support staff to manually go in for each client to populate £ values.

benjaminfabi

By negative affirmation do you mean you will write the above personalised document to all the clients and move them en masse, assuming a lack of response is to be treated as an instruction to act?

If so, I think this is a bad idea. Unless your firm has DIM permissions, you should not change something so fundamental as the investment portfolio manager without positive engagement and advanced acknowledgement from the client.

You need only think about how the Ombudsman would consider a complaint after the fact from a client who didn't properly understand the communication and then suffers a negative outcome.