A roundtable hosted by Thomas Miller Investment also found that DFMs face challenges in accurately translating market movements, investment performance and portfolio management decisions into a language that clients can understand and appreciate.
The roundtable was attended by financial advisers, discretionary fund managers, lawyers and consultants.
Head of intermediary business development at Thomas Miller Investment, Matthew Lonsdale, said: “As an industry we are not dynamic enough. Many firms are still shoehorning clients into a ‘Balanced Index’ portolio, and rarely focus the investment strategy on what the individual client needs.
“It is our role as the DFM to speak in plain language to financial advisers and private clients, to translate what we are doing in portolios and relate that to how the clients can achieve their goals.
“We need to move away from the emphasis on short terms performance and focus more on meeting individual objectives in the long term."
He added that managers are often poor at analysing performance subjectively for clients because they focus on making large sums of money in a given quarter over long term returns.
In April, financial research company Defaqto found that 45% of independent financial advisers were outsourcing their investment proposition in 2013, with more than half doing so via discretionaries, pointing towards growth in the DFM sector.
Defaqto insight analyst for wealth management, Fraser Donaldson, said he believed the figures would climb again in 2014.
“One of the biggest consequences of the Retail Distribution Review has been the number of advisers who have already, or are now looking to outsource their investment propositions,” he said. “Discretionary fund management is still relatively new to large segments of the adviser market. As demand and interest continue to increase, so the solutions available continue to evolve and innovate.
“The choices and options within the market are already very different to what they were just three or four years ago so it is important for advisers to keep abreast of how this market is developing.”
Thomas Miller Investment manages assets for insurance mutuals, charities, pension schemes, governments and private clients with £2.5bn in total funds under management. It is part of the Thomas Miller group which employs over 550 people across four continents.
