According to Kohler, roughly 25% of retail assets on LISP platforms now sit within DFM portfolios, a dramatic increase from the estimated R40 billion managed by DFMs many years ago to roughly R750 billion today. “DFMs have institutionalised the retail investment market,” he explained. Where asset allocation decisions were once heavily influenced by relationships, reputation or marketing, DFMs introduced greater discipline, due diligence and governance into the allocation process.

The growing popularity of DFMs also reflects another reality, advisors increasingly recognise that they cannot do everything themselves. Joao Frasco shared an anecdote from the summit where he overheard two advisors discussing exactly this point. “One advisor said, ‘I don’t get paid to select funds. I don’t have the time to do that. My role is advising clients on their financial needs.’”

That observation, Frasco said, perfectly captures the value proposition of a DFM.  With approximately 1 900 local funds available, and tens of thousands globally, advisors simply do not have the time to perform the level of due diligence required to evaluate managers properly. “That’s where the DFM steps in,” Kohler explained. “We provide investment alpha, practice alpha and advice alpha.”

Investment alpha comes from portfolio construction and manager selection. Practice alpha comes from operational efficiencies and scalable portfolio management. Advice alpha allows advisors to focus more deeply on behavioural coaching and client relationships.  

Frasco then introduced a fascinating philosophical dimension to the discussion.

Using the analogy of bricks forming a wall, he rejected the idea that investment success comes from a single “silver bullet” or rigid investment style. “A portfolio is not a single brick,” he explained. “It’s many bricks working together.” Those bricks include manager research, portfolio construction, strategic asset allocation, operational due diligence, data systems and people, all contributing collectively to investment outcomes.  

That thinking ties closely into what Frasco called the “philosophy of emergence.” Borrowed from biology and systems theory, emergence describes how complex outcomes arise from relatively simple interactions. He used the example of flocks of birds moving in coordinated patterns. “There’s no single bird directing the movement,” he explained. “Complexity emerges from a few simple rules.”

Frasco believes capital markets function similarly. Markets are shaped by millions of interactions between investors, companies, governments and institutions, producing outcomes that are often impossible to predict purely from analysing individual components.  That complexity also influences how investment teams themselves are built.

“The single most important factor is people,” Frasco said. He argued strongly against the old “star portfolio manager” model, favouring instead diverse teams with different perspectives, experiences and analytical lenses. “In investments, you actually want disagreement,” he explained. “You want people seeing the world differently.”

That diversity of thought becomes increasingly important in an environment where AI is beginning to transform investment analysis itself. Frasco described AI as “the most consequential technology ever. We’ve essentially invented intelligence,” he said.

He explained how AI is already helping with coding, portfolio analytics, manager analysis and data interpretation within investment businesses. Importantly, he does not see AI replacing human expertise but rather amplifying it. “The DFM gives you structure,” he said. “AI gives you scale.”  

For advisors, however, the core lesson remains remarkably simple. As I noted toward the end of our discussion, even after years of training financial advisors myself, I still use a financial advisor personally. Why?  

Because in an increasingly specialised and complex world, value comes from knowing where expertise sits and building the right partnerships around it.

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