Discretionary Portfolio Management
Frontier Financial’s main business is discretionary portfolio management (“DCM”). What does that mean, and how does DCM differ from other forms of investment advisory?
DCM’s main feature is that a client assigns a registered discretionary portfolio manager (“PM”) the legal authority to make and implement investment decisions within the client’s account.
On the surface it seems the investor is giving away control of their assets, but on the contrary, several important DCM features provide much more client protection than any other form of investment advising.
For example:
DCM’s main feature is that a client assigns a registered discretionary portfolio manager (“PM”) the legal authority to make and implement investment decisions within the client’s account.
On the surface it seems the investor is giving away control of their assets, but on the contrary, several important DCM features provide much more client protection than any other form of investment advising.
For example:
- All DCM investments must at all times adhere to the investment guidelines and asset class ranges established by the client and the PM in the Investment Policy Statement (“IPS”), part of the investment management agreement signed by both parties at the onset and updated as needed thereafter.
- All PMs must be registered by their provincial securities regulator. You can search for an individual PM’s or a PM firm’s registration status here. Every registered individual must first have several years of relevant investment experience, but must also have earned earned either the Chartered Financial Analyst (CFA) or the Chartered Investment Manager (CIM) designation. Both designations’ Code of Ethics require a PM to put their clients’ interests ahead of their own. The CFA Institute Code of Ethics also imposes upon CFA charterholders a duty of loyalty to their clients, while the CIM Code of Ethics imposes a duty of care to clients. These fiduciary duty requirements are absent from all other investment advisory channels.
- Frontier Financial, like most PM firms, does not hold any client investments. Instead, all investments are held in a client account established with an external custodian. Ownership of the client’s investments always remains with the client: the PM has authority only to conduct trades within the custodial account. Frontier Financial uses as its clients' custodian Portfolio HiWay Inc., a Toronto-based investment dealer that’s a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).