A Centralised Investment Proposition (CIP) is a standardised investment approach that allows financial advisory firms to free up their time from product picking and complex due diligence, and instead focus on the real value-added client specific activities that only the client facing adviser can provide.
A fully customisable, independent and open market CIP, where the adviser retains control of the client relationship, is the ultimate in allowing advisers to spend more time on their clients. It also removes any conflict of interest regarding remuneration or product selection related to the product.
Assuming a firm is using a top-class CIP, the benefits it brings to advisers and their clients include:
An investment process that is easy for the clients to understand
A more structured and better researched investment solution
The ability to manage wealth in line with the client’s risk profile
The ability to manage risk and return expectations more effectively
Better informed clients via rich reporting
The adviser then has more time to focus on their clients and their individual needs and objectives, rather than spending time trying to research and deal with various investment products providers each and every time in a somewhat ad hoc fashion. This leads to better overall advice for the client. The focus for the adviser shifts from the product to the process of planning.
If we asked Ireland and Lions out-half Johnny Sexton what he focuses on when he lines up a penalty kick, he would talk about the process that he follows; the placing of the ball, preparing his run up, visualising the kick and controlling his breathing. He would not talk about the 3 points on offer which could make or break his team’s day.
Similarly, advisers and their clients should be focusing on the planning process rather than the product when it comes to designing an investment strategy for a client.
For example, a good CIP will give access to investment options that cover both exit tax and CGT, and the adviser will now have time to focus on analysing the client’s tax situation to more suitably advise their clients. If a client has CGT losses or pays a low rate of income tax, then ending up in an exit tax solution may well be seen as negligent. Many industry experts now see this as being an increasing area of suitability risk in the future.
Assuming a firm is using a top-class CIP, the benefits are numerous. It will act as a safe pair of hands that greatly supports and enhances cash flow and objective based financial planning, with consistent investment returns.
The investment process will be easy to explain to clients and there will be no interruption to the adviser firm’s independence as there are no commissions paid by the CIP provider, and the portfolios will be totally open market and built using best of breed funds.
All of this leads to consistency of advice and a similar service for similar clients across the entire client book. It will also be easy to report back to your clients on the performance of their investment and progress towards their goals.
Also, assuming that the firm is ‘outsourcing’ to another provider for their CIP, then the adviser firm should also have significantly reduced the risk associated with product selection, due-diligence and suitability.
Having a top-quality CIP will enhance the value of a business and help to give the business a more robust succession plan and exit strategy, by centralising processes and keeping them consistent – key to any corporatised business. And as highlighted in Vanguard’s Adviser’s Alpha concept, asset retention is crucial to building value in a fee-based wealth management business. This is made easier when using a top-quality CIP.
Most importantly, the right CIP can aid an adviser firm to position themselves for future changes in the industry, allowing the firm and its clients to ride a wave of success.