After an almost two-year hiatus, the Financial Markets Authority (FMA) has licensed a new discretionary investment management service (DIMS) operator.
The Nelson-based advisory firm Totara Wealth Management was granted its DIMS licence at the end of June – the first firm to enter the market since August 2016.
Totara was formed last August by three Nelson-based advisers: Richard Harden, who ran an eponymous practice; Meredith Cornelius of Financial Strategies Nelson; and, ex BNZ Nelson adviser, Richard Grimes.
Under the Financial Markets Conduct Act (FMC) all DIMS operators were required to be licensed with size-based compliance variations. With the addition of Totara, the DIMS universe has expanded to 52 licensees – a broad mix of banks, fund managers, stock brokers and financial advisory firms.
Financial advisers can also offer ‘personalised DIMS’ under the Financial Advisers Act although it is understood very few have gone down this route.
Personalised DIMS are essentially portfolios tailored to individual investor specifications while ‘class DIMS’ – which require a licence – are off-the-shelf models supplied to bulk client groups.
However, the FMA website says there is “no bright line test as to what is, and what is not, personalised and class DIMS”.
“The DIMS provider needs to evaluate whether the investment strategy is bespoke, and the person exercising discretion under the authority needs to evaluate whether the decision they are making is bespoke to the investor,” the FMA guidance says.
DIMS licensees are required to report annually and quarterly to clients across a number of metrics including: transaction information; portfolio asset profile – covering asset class, product issuer and number of products; portfolio administration details such as dividends and fees paid; and, portfolio valuation.
The FMA could not provide aggregated data on the DIMS market, a spokesperson for the regulator said.
“It’s not something that we hold in an easily accessible format,” the FMA spokesperson said.