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Working with adviser firms on business development issues is always a challenge given the amount of regulatory restraints coming over the hill. One key area that we’ve found that helps shift the growth gears is re-defining your Centralised Investment Proposition (CIP)
One of the most important issues consultants need to factor into any strategy engagement is the rule book. The FCA define CIPs as:
‘Where a firm offers a standardised approach to providing investment advice (including portfolio advice services, distributor-influenced funds and discretionary fund management)’. A portfolio advice service is defined as: ‘An ongoing investment advice service that did not amount to discretionary portfolio management. It typically involves recommending a range of investments to meet an asset allocation and reviewing this on a periodic basis.’
The business case for adoption of a CIP is compelling. CIPs combine the benefits of ensuring robust advice processes are implemented (segmentation, risk profiling, cost consciousness) with dependable delivery (portfolio construction). In essence a CIP will ensure your business is streamlined, you will tick all the regulatory boxes for walking your talk and your clients will get what you do and love you for it.
The most powerful issue is it builds your CIP philosophy that ensures business owners are not romanced by product providers who are unsuitable for the firm and its clients.
Our CIP philosophy: the key issues
Client profile & segmentation (we always start with the client)
Relationship: Defining your client journey and relationship you desire is very powerful, this alone will define the CIP structure and ensure you stay clear of just focusing on segmentation by assets alone
Financial investment size & adviser charging: By focusing on relationships, you will be surprised that the financial investments will be larger than you think. This is because clients enjoy your services, understand them and want to refer others in. You’ll also be able to charge more for your services
Recognise outlier clients: Identify those clients who are unsuitable is easy when your CIP is built on solid foundations. This will also mean that the ‘sunset’ clause on commissions (April 2016) will be a non-event for your business
Business controls
Terms of business and client agreements need to be adapted and will become a marketing opportunity along with a compliance necessity
Financial plan/suitability report: Templated with relevant CIP philosophy and portfolio structure and aligned to a paraplanner function
Reporting: Provider and client communications can be factored into high frequency tasks which a high quality back office system will supply
Business objectives
Risk profiling: Use of ‘enabler’ attitude to risk tools and careful client questioning will ensure your CIP risk profile matches your clients
Internal documentation: Understand and apply all reporting requirements and align this with back office technology
On-going management process: Systemising the front and back office operations will create a ‘middle office’ ensuring corporate governance and management information is not missed and is used effectively
Your burning ambition
Client needs, objectives and aspirations: What type of investment experience do you wish to generate? This is central to the proposition you design
Passive-active or both: Belief in the strategy you use is crucial, if you don’t believe it how can your clients?
In-house/outsourced: If it’s outsourced then the fact that you’ve taken care and attention to build your CIP around client needs means there will be no issues around the old ‘who owns the client relationship’ chestnut. Both strategies will require an investment committee, one grounded in your CIP philosophy
Due diligence
Robust process: Taking a four eyes approach is crucial, this is one of the most common areas of risk in best practice we have seen
Client centred: Allying treating customers fairly principles and/or your own client charter will ensure the proposition is client focused
Documented: Evidence based practice is crucial for good compliance and client engagement practice
By revisiting your CIP you will enable the business to streamline, walk its talk, ensure your offering value for money and is truly client centred.