Auto Rebalancing functionality on platforms
Wildparaplanner
Member
Hi all,
Some platforms provide the option of automated periodic rebalancing of portfolios (annually, quarterly etc...) and is always back to a default investment strategy weighting.
Some people I speak to claim the firm needs to have DFM permissions to be able to do this, whereas others say that as long as the client has given consent to such a practice, it is not considered discretionary as there is no discretion involved.
I am inclined to agree with the latter, but is there anything to back this up?
Thanks
Wild
Comments
Whilst I am sure someone can find a definitive FCA opinion on this, but I agree with you. We are just about to do the same with some of our models (to ensure there is enough cash more than anything).
Our third party compliance advice says as long as you have agreed rebalancing with the client at outset, it is done on pre-determined dates, it goes back to the original asset allocation and there are no changes to the underlying investments, then it should be fine and no DFM permissions required. Any deviation and you would need DFM permissions.
Automatic/mechanical rebalancing of an advisory portfolio is perfectly fine without DIM permissions so long as it is carried out according to the strict methodologies set out by the firm in its original suitability report.