What is a DFM or MPS fee?
A DFM or MPS fee is the charge for a discretionary fund manager, or a model portfolio service, choosing and rebalancing your investments, and it is paid in addition to the adviser charge, platform fee and fund charges.
Because it is a fourth layer, it belongs in the total-cost figure a firm must give you in pounds and as a percentage under COBS 6.1ZA.
What the terms mean
- Discretionary fund management (DFM). A manager makes investment decisions for you within an agreed mandate, without asking first each time.
- Model portfolio service (MPS). A ready-made set of portfolios, usually run on a platform, that the manager rebalances for everyone in the same model.
Advisers use them so that day-to-day investment decisions are handled by a specialist, while the adviser focuses on planning.
The question to ask
When a DFM or MPS is used, ask what each party does and what each charges. The adviser charge should reflect what the adviser still does, and the total should be shown in pounds. See total cost of advice.
Related definitions
Sources
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