The recent Lang Cat report Better, Stronger, Faster: How do we rebuild centralised investment propositions from here? made for interesting reading.
They surveyed 110 financial planners who run a CIP and delved into how they currently handle the investment process.
In my opinion, one of the key conclusions of the report was that, unless they have the scope and scale to provide in-house investment solutions, financial planners should focus on financial planning and partner with a suitable investment specialist to provide their CIP.
This is a theme that plays out time and again yet we know there are many financial planners who still want to “remain in control” of the investment process. Of course, they should be in control…anyone charging to provide financial advice should absolutely be in control of what is happening to their clients’ investments. However, being in control and doing all the specialist investment work yourself are two different things.
Client authorisations are a major issue
Trying to run investment portfolios under an advisory model is fraught with problems: aside from the time drag that keeps financial planners from seeing more clients, maintaining and rebalancing models is not straightforward. 82% of firms in the Lang Cat survey say getting client authorisations is a major issue. Delayed responses results in having to run a range of models and it also potentially impacts upon client outcomes. Secure messaging (rather than traditional mail) can improve the process but there’s still no guarantee clients will respond.
Even if clients do respond, asking them – who are likely to have little or no expertise in investment – to approve changes to portfolios seems rather at odds with why they are using a financial adviser in the first place.
Another problem area is tools that point towards the right investment outcome for clients. Unless these tools are designed to work with specific investment portfolios, client outcomes can be severely compromised, particularly in relation to risk profiling.
Some back-office technology can also present issues. A tech provider that allows advisers to drive efficiencies in potentially flawed practices (such as enabling advisory portfolios to be rebalanced to suit the advisers proposition even if not necessarily right for the client, or shoe horning clients into a limited range of portfolio options) can’t be good news for clients and may increase risks for the firm.
Specialist is best
It seems to me that the best way for the industry to develop is if each specialism focuses on their strengths, rather than trying to provide an end-to-end, multi-faceted solutions. A jack of all trades is so often the master of none.
Back office providers should focus on being the best back office they can be, advisers the best financial planners, platforms the best at custody and execution and discretionary investment managers the best at developing and running portfolios that meet specific client needs.
At the heart of all this should sit the financial planner – not the back-office provider, platform or investment provider. They are the ones who know their clients best and who have the most to lose if things go wrong. This is why we have developed an investment solution that does just that – it keeps advisers in control but frees them up from the need to do the time-consuming leg work.