What principles did you build your Centralised Investment Proposition (CIP) around? Can you hand on heart say it fits your clients’ best interests or did you try to shoehorn it into your existing model?
A recent article on Citywire, following a New Model Adviser survey revealed that 98% of advisers said they had a CIP, two firms used restricted panels and some, who had a very select number of clients, used an entirely bespoke model.
The FCA have highlighted flaws in some CIPs, saying they believed some lacked structure in research and the due diligence process and that results were not always up to date or challenged adequately. It strongly warned against firms developing investment propositions built to suit their own preferences rather than their clients’.
Interestingly, the results of the survey found that 71% of advisers are doing their own in-house fund selection. But this does beg the question, ‘how qualified are they?’ It also found that many CIPs would stack up favourably against independent processes.
So for those acting in-house; what do advisers consider most important in fund selection between cost, fund track record and manager track record? Their answers revealed 27% thought cost, 38% fund track record, and 36% manager track record. Are these decisions always, however, 100% aligned to the client need? You would expect, for example, a client may put more weight on manager performance.
It raises the issue, then, as to whether individual client needs are being catered for? Some CIPs make a valid distinction between pre and post retirement but in reality only 14% do this. Should that figure not be much higher? It probably reflects the fact that the Pensions Freedoms were brought in very quickly so the investment scene has not always caught up in adapting CIPs to the new changes. If this were done, it could have a major impact in making CIPs more client-centric.
There is a different approach and that is the solution offered by CleverAdviser. This robust investment service has the flexibility to adapt to fund changes quickly, making clear recommendations based on algorithms and data. This takes human instinct and emotion out of the equation.
The business model of any particular firm will always determine which CIP is the best fit but high skill levels and a good understanding of clients should always be the key driver in choosing what to offer. It should be something that is also analytically reviewed. So, in light of this, take a step back and consider whether your CIP has been in place for a while now and needs to be reviewed?
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