As the institutional advice market has all but evaporated, US-based fund manager Dimensional Fund Advisors has shifted its focus to the growing second tier of advice networks and expanded it footprint in the domestic market by about 25 per cent over the last two years.
The group has roughly $40 billion of funds under management in Australia – up from $30 billion two years ago.
According to Nathan Krieger, co-head of client group at the $800 billion US-based quantitative-style fund manager, the institutional migration out of advice over the last five years has led to a new power base for advice centred on the middle market dealer groups.
“The mid-level licensees have started to really form in the market,” Krieger tells Professional Planner. “There was a period where that part of the market was light but as the institutions have fallen out those firms have expanded again.”
As a result, Dimensional has ramped up engagement with a number of these market players; Krieger says the fund manager has worked with 70-adviser group FYG Planners for several years and enjoys a “strong and growing” relationship with Centrepoint Alliance, which has 317 advisers spread across its Alliance Wealth and Professional Investment Services dealer groups.
Krieger says Dimensional has also had “strong interactions” with the surging Lifespan Financial Planning network – one of the fastest growing licensees in the country in terms of adviser numbers.
Lifespan chief executive Eugene Ardino says the group has had a few discussions with Dimensional. “I think they’re a good manager,” he says.
A few advisers have gained ad-hoc approval to use Dimensional funds over the years, Ardino says, and several of the group’s funds have now cemented spots on Lifespan’s approved product lists.
Dimensional has an “unusual philosophy” according to the Lifespan CEO.
“They are unique in their philosophy in that they sort of sit somewhere between active and passive,” he says. “They’re very strong about their philosophy that active management doesn’t add value and they’re very strong about what they believe.”
That unusual investment philosophy is a trademark of the group. Another quirk is the way they distribute their products, which Dimensional’s co-chief executive and head of financial adviser services David Butler explained in April 2019.
“We give [advisers] our view, and once they’ve come through our conferences and our training we ask them how they would use a Dimensional fund,” Butler said. “If we feel confident that they would use it in a way that would be compatible with other shareholders then we’ll allow them to access the funds.”