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DIMS will bring down investor costs: Duston

SBS’s funds management business is the third organisation to be granted a DIMS licence and it plans to offer its service to independent financial advisers.

Friday, June 5th 2015, 12:21PM 5 Comments

Funds Administration NZ executive director Graham Duston says its Synergy investment programme is being offered with advisory firm Consilium.

He says going through the DIMS application process was “arduous” and time consuming.

Duston says the advisory industry is going through a tough period of change with three key factors causing the disruption.  DIMS, he says, will help address some of these issues.

Rising compliance costs is one of the issues and many advisers will have uneconomic clients.

The third issue is high total fees.

“I just don’t think they are sustainable,” he says.

He says one of the things about DIMS is that “for the first time in history put down total costs to clients.”

He suggests some firms had pulled out of the DIMS process as they didn’t want to reveal, in such an open way, the total costs to clients.

With DIMS advisers will need to segment their databases and treat each group differently. In the SBS/FANZ model clients with less than $1 million will be serviced with the Synergy DIMS solution and bigger clients will get a “soft-touch” and more personal service.

With Synergy “we can bring wholesale investments to party.

“One of the great things about DIMS is that you lower the overall cost to the investor.

Duston says although FANZ has only worked with its bank-aligned advisers previously it now wants to build a scalable business that it can take to the wider market.

The Synergy offer is expected to be rolled out next month.


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Comments from our readers

On 5 June 2015 at 8:27 pm Realist said:
It would be useful if the costs were actually quantified. Given that the FMA haven't come up with any renewal figures and their estimates for DIMS licences it seems that it would not be possible to even realistically estimate the costs.
On 9 June 2015 at 10:38 am winstonkey said:
Its difficult to see the DIMs part of the regime actually adding to investor choice.
Based on who has been granted DIMs so far and the type of organisation that has allegedly applied for a DIMs licences, most of them offer a closed ecosystem of investment choices. They are essentially saying to their clients, "You can have any investment you like, as long as it one that is managed by us, where we collect the management fees as well as the client monitoring fees". Three licences granted so far - exclude The Todd Family as it is a special case, but Gareth Morgan and SBS both manufacture their own product and as far as I am aware have little or no third party choices of products available to investors. Can they really, really say with hand on heart that the best of breed product solution for a particular asset class, out of everything available in the market, coincidentally happens to be the product that they manage? Conflict of interest here?

I hope I am wrong, and that genuinely independent providers of investment advice, who source their investments from a wide range of providers get over the DIMs line, but I wouldnt hold my breath as the DIMs requirements seem deliberately designed to exclude smaller, truly independent AFA businesses.
On 9 June 2015 at 8:51 pm Graham Duston said:
Thanks Winston to take the time to comment. You will be pleased to know that for our Branch proposition we offer an "open architecture" investment offering that offers access to a wide range of investments and managers. Our own product are certainly in the minority.

I'm also pleased to advise that we will be launching a proposition tailor made for Ifa's with our JV partner Consilium that will form part of our Dims offering. We will not manufacture any products as part of this offering.

We look forward to talking with you further when this service is launched.
On 10 June 2015 at 12:57 pm Pragmatic said:
Thanks Graham. I confess - I'm skeptical about who the primary beneficiary is out of the existing & proposed SBS initiatives: SBS (ie: low tracking error / peer risk) or the consumer. I look over the Tasman and don't have much confidence that the consumer will be the winner.
On 10 June 2015 at 7:08 pm Graham Duston said:
I understand why industry participants have/ are sceptical around fees. However the new disclosure rules around dims mean that the investor has a much better chance of actually understanding the total cost of their investment service. That has to be good for the consumer.

Tracking error is interesting. As an observation I've noted that advisers get into trouble with investors when they deliver an out come to the investor that was different to the one that they expected. Clarity of proposition, costs and delivery of expected out comes will become increasingly important. It's going to be an interesting year!

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