When balancing regulatory requirements with business efficiencies, this is a question that advisory firms often ask.
The starting point is a deep understanding of your client target markets and firm investment beliefs. Looking at the former, it is important to understand the commonalities and needs of each client group. By having a broad description, this will enable you to align investment solutions that are appropriate and provide good client outcomes. Some considerations are below:
- Life stage in the investment journey
- Importance of cost
- Assets held
- Investment knowledge and experience
- Level of complexity
In respect of the latter, advisory firms should articulate their investment beliefs as these will help define the investment solution characteristics that will be centrally selected. Consideration should be given to the following:
- Passive or active or a blend depending on your views in respect of market efficiencies and cost?
- Home bias in portfolios or based on world market cap?
- Fixed interest dynamic duration management or a static approach?
- Asset classes utilised. Equities and bonds or the inclusion of alternatives, commodities etc?
- Inhouse or outsource investment management. If considering running inhouse portfolios, does the firm have the required skill set, competencies and time?
- Are different investment structures appropriate for different client groups i.e. multi asset funds for those starting out on their investment journey as opposed to a Discretionary Managed Portfolio Service for more mature investors?
- Does retirement (decumulation) require a specific solution to assist with the additional considerations of sequencing risk and pound cost ravaging?
Once the above has been formalised, it is now when research and due diligence can be carried out into the selection of appropriate solutions. It is important not to conflate these two requirements as they form distinct roles in the process. Research is predominantly quant based around the filters that have been identified as important from the two steps already outlined.
Once a shortlist has been arrived at, a comprehensive review can be carried out to identify the solution(s) that best meet your requirements in providing good client outcomes.
It is important to review your CIP on a regular basis as this is not a “one and done” process.
How can we help?
Via Sense Network and Lyncombe Consultants, we support your choice of proposition, based on your client needs in order to achieve the right advice, the right charges and the right risk management for your clients. We understand that every client's needs are unique, and we are committed to helping you to provide tailored solutions that meet those needs effectively.
Our approach is centred on empowering you to maintain control and ownership of your business and client relationships. For those looking to set up a new business, our extensive resources and expert guidance to select the right CIP for you can help you to navigate the complexities of the financial advice industry, ensuring a smooth and successful launch. Established firms can benefit from our robust infrastructure and support services, designed to enhance operational efficiency and client satisfaction in line with Consumer Duty regulations.
Get in touch with our team today for a no-obligation initial discussion to discover how we can support your chosen advice proposition and help you to achieve your business goals.
