Financial advisers in Ireland today invest a lot of time and energy seeking an edge. You are ambitiously and progressively looking for ways to improve your entire proposition for your clients, and to deliver excellence in financial planning. You also recognise the benefits of doing so for yourselves, as improving the experience for your clients also future proofs your own business.
As part of this work, you are unpicking each part of everything that you do and improving your service offering while achieving efficiencies. Your goal is to run a business that is growing, lean and efficient, compliant and well managed with robust and repeatable processes. But, often that’s easier said than done, especially when your main aim is to provide clients with highly personalised and tailored advice.
Add in the torrent of new funds and products coming into the market and it’s clear that advisers face a heady mix of issues to manage as they try and deliver advice to their clients.
The ultimate business solution is to find a way to provide customised investment advice each and every time, that’s scalable, compliant and robust, whilst not jeopardising your own impartiality and objectivity. For many advice firms in jurisdictions such as the UK, Australia, South Africa and the USA (where charging fees and using open market platforms is a common everyday occurrence) Centralised Investment Propositions (CIPs) have become a key component in attempting to solve the conundrum.
A CIP is a standardised investment approach that enables you to offer a comprehensive, consistent and value adding investment solution to all of your clients. It frees up your time from starting afresh with every client, product picking and dealing with multiple product providers, and instead enables you to focus on the real value-added client specific activities that only a true client-facing adviser can provide.
According to figures published by Financial Express (UK) back in 2015, up to 80% of larger firms had adopted a CIP as a core operating process in their business. To find out more about the different types of Centralised Investment Propositions and their different attributes, please see our White Paper: Riding the Winds of Change
Understanding your client base
Knowing what your client bank looks like is key to building an effective CIP for the clients of your firm. This is also necessary under the Target Market Assessment requirement of Mifid II. When you think about what your client bank looks like from a life-stage perspective and combine this with the type of service your clients require for their needs and objectives, then this will inform you as
to the type of CIP required to support your business proposition. This process of client segmentation is key to delivering a CIP in an efficient and effective way to clients. Knowing clearly which clients fit into which proposition allows advisers to deal with clients more efficiently and compliantly.
A good CIP avoids “Shoehorning”
A crucial aspect of a CIP is that it must be suitable for clients and not just the adviser firm. For example, a key concern of regulators is shoehorning – that is where adviser firms attempt to force their entire client bank into one of a limited number of pre-packaged risk buckets. A robust CIP avoids this practice.
What should your CIP deliver for you?
A top-class CIP must meet several criteria. It must be capable of monitoring and reporting on the client’s portfolios, and to easily keep portfolios up-to-date and consistent for all clients. Most importantly it should provide consistent returns for all clients across the risk spectrum. The last thing you want as an adviser is to put in the hard yards of identifying the level of return and risk that the client needs, only to implement a solution that breaks down, resulting in totally inconsistent investment outcomes. This simply has the potential to destroy the value you add as an adviser.
A CIP must also be adaptable to the client. It must have sufficient flexibility to cater for various risk appetites, time frames and investment preferences and be easily adjustable should a client’s situation change. It should ideally be able to cater for different client preferences around things like passive and active investment approaches, cost, ethical considerations and tax considerations. It should be as transparent as possible from a cost disclosure perspective and maintain independence in its investment selections. Ideally the CIP will also connect an investor’s risk profile seamlessly to the portfolios it provides for clients.
Your CIP should do all of the heavy lifting for you in relation to “running the money”, leaving you with the time and space to get on with the areas where you can add enormous value to your clients – helping them plan their financial future and make wise financial decisions to help them achieve the life that they want to live.