DIMS a two-step process
For advisers to be classed as offering Discretionary Investment Management Services (DIMS), they have to be able to tick two boxes, financial law experts say: Whether they have the discretion to make a decision and whether they have the power to implement it.
Wednesday, March 12th 2014, 6:00AM 
11 Comments
by Susan Edmunds
Some advisers are worried that the new rules for DIMS, introduced as part of the Financial Markets Conduct Act, are too onerous.
From December 1, everyone who is deemed to be providing class DIMS will have to be licensed. AFAs who are providing personalised DIMS can operate without a licence but will also be more strictly scrutinised.
There’s been debate in recent days over what constitutes DIMS.
Jeremy Muir, of Minter Ellison Rudd Watts, said: “There’s two elements to it. One is that the adviser has the discretion to make the decision and one is that they have the authority [to enact it]. One or the other is not enough to constitute DIMS.”
He said situations where an adviser had the authority to do things under initial instruction from the client would not necessarily be a DIMS scenario.
But if someone had the power to make adjustments to a client’s portfolio without reference to them, that was technically DIMS, even if the changes were small.
Tim Williams, of Chapman Tripp, said the emphasis was on who was making the decision. “If you’re consulting with a client but you’re the one making the decision, that’s DIMS.”
Muir said another hurdle for many advisers would be determining whether they were offering personalised DIMS or class DIMS under the new law.
He said it was likely that a lot of people would start adjusting their systems now to fit into the right category. Muir said he expected more guidance from the FMA on what constituted class advice.
The FMA’s latest consultation document had asked whether a transitional period was needed for the December 1 deadline, which would allow some advisers more time to work out where they would fit.
Those who were worried about the timetable should make a submission, he said. “If you’re offering class advice you need a licence by then but we’re only getting through the process to even apply for the licence and making the decision now.”
Williams said the licensing for class DIMS was to bring providers in line with fund managers. He said model investment portfolios would be the sort of system that would be counted as a class DIMS.
He said the difference between class and personalised DIMS could get blurred at times. “But if you’re saying this is the type of product I recommend in general for everyone, that’s class DIMS. If you’re saying this is the type of product I recommend to you taking into account your personal circumstances, that’s personalised.”
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Comments from our readers
So once a client has signed a DIMS authority, the advisor can consult with the client until he's blue in the face; whatever the outcome of those discussions he is still running a DIMS.
Aegis systems are so good that we can neither steal our clients money nor can we run Ponzi schemes
So now we will either waste a lot of time and cost and jump through some draconion hoops to get a DIMS licence
Or we will waste endless hours of our time getting clients to sign off
I know 99% of my clients will simply say "why are you asking us ? That's your job. If you recommend it, then just do it".
So pointless and massive time wasting, mountains of paperwork and trees destroyed
That's time that could have been put to far better use, such as research, or better advice
To give good advice, I need time to think, research and consider many issues
In short I need to productively use my time
Do the powers that be want the public to get better advice or not ?
Or do they just want to hobble us ?
Even if an adviser makes minor variations to a class DIMS strategy for a particular client, that is still defined to be class DIMS.
The illustration of the personalised/class distinction I gave in the quoted sound-bite was for a particular product investment decision. For portfolio construction substitute "strategy" for "product". I hope that helps.
Ally, your conclusion in your latest posting is correct. Merely consulting on a decision is insufficient to make a DIMS, advice. But the destinction is a fine one. "Tell me if you disagree"(consulting) could easily become "I recommend and you decide" (advice). I sympathise that the adviser may need to be the one that demonstrates that they have done one and not the other when the FMA comes calling. Again, I hope that helps somewhat.
Do you have enough options so you really can fit the portfolio to the client, not fit the client into your standard options.
If you have just one portfolio (like I think David Ross did) then you are a fund manager. So you will be regulated like one.
If each portfolio really is personalised and different with nothing standardised, then I think you are OK.
Where it gets interesting is if you offer say a limited number of portfolios that are then standardised. Is that enough for your advice to be sufficiently personalised?
My gut feeling is if you are running only 2, 3, or maybe 4 model portfolios you might have a difficult discussion with the FMA. That is a fairly limited template of options to cover all clients. You may be fine - but I would get my arguments ready.
I doubt anyone, especially the FMA, has any clue how many different types of portfolios are sufficient to ensure advice really is personalied. My guess is having lots of possible options will be the best defence.
It really goes against trying to give the client simple, low cost advice. This legislation will drive impartial advisers from investments, and leave investors with less options. This surely is not the intended purpose.
The example you talk about is likely to be class DIMS (for which a FMC licence will be required)
It seems as though even if you had a standard balanced portfolio to which you added any number of individual stocks, you would still be class DIMS.
If you aren't a DIMS, then merely having a standard portfolio + a single stock doesn't turn you into a DIMS.
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