Room for improvements identified
The Financial Markets Authority (FMA) has released its inaugural monitoring report on the Discretionary Investment Management Services (DIMS) sector.
This sector plays a significant role in New Zealand’s wealth management landscape, with 49 licensed DIMS providers managing more than 47,000 retail accounts and $48 billion in assets.
On average, a DIMS investor holds a portfolio valued at approximately $1 million as of June 2024.
DIMS allows investors to grant providers authority to make financial product decisions on their behalf, placing substantial trust in the providers’ judgment and controls.
Key findings: Strengths and areas for improvement
FMA’s report revealed that, while DIMS providers strive to achieve positive investor outcomes, improvements are needed in their governance and controls.
The monitoring focused on five critical areas:
- Conflicts of interest management
- Investment management practices
- Clarity of investment strategies
- Performance monitoring processes
- Fee disclosure and transparency
“We were generally pleased with what we observed,” said John Horner (pictured above right), FMA’s director of markets, investors, and reporting.
“Where a client allows another person to exercise discretion over investment decisions, it demands a high degree of trust and confidence, both in the people involved, and the processes and controls used.”
Future monitoring and sector engagement
FMA’s findings stem from a 2022 survey of DIMS providers, followed by targeted monitoring of nine selected firms.
The report highlighted both good practices and areas requiring enhancement to strengthen investor protections. Future monitoring efforts will build on these findings, with a focus on ensuring continuous improvements.
FMA, which recently presented at the Financial Services Federation Conference and the INFINZ Conference 2024, is also planning a webinar with industry stakeholders to discuss the report’s recommendations. Interested participants can register by contacting [email protected].
A roadmap for sector improvement
As the DIMS sector continues to evolve, FMA’s insights provide valuable guidance for providers to enhance their governance and investor outcomes.
The focus on transparency, effective controls, and fee disclosure will be key in maintaining trust in a sector where discretion plays a vital role in managing investments.
For more details, download the DIMS Sector Insights 2024.
Read the FMA announcement here.
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