6 min read 19 Aug 21
In the data-rich world we live in, where consumers’ every move is tracked and analysed, micro-marketing and hyper-segmentation would seem to be the ideal.
But in the heavily regulated world of financial planning, where treating customers ‘fairly’ is synonymous with treating them ‘consistently’, how can firms best strike the balance between advising clients as individuals, while also being sure to treat them the same?
For many firms, the answer to this cookie-cutter paradox has been to build a framework to standardise good advice.
In the accumulation phase of a client’s life, this is known as a centralised investment proposition (CIP).
As a client approaches the time when they need to draw down money, the framework shifts to what is increasingly known as a centralised retirement proposition (CRP).
Over the past two years, NextWealth has conducted two research reports with Ascentric to track the growth in and evolution of CRPs in the UK.
Among other things, we have assessed trends in CRP adoption, popular features, and their biggest perceived benefits.
We are now drawing on that research to create a guide to the practical considerations at hand when you pick a CRP.
The guide is aimed at any advice firm thinking of creating its own CRP (or reviewing one they have already created).
As well as offering a step-by-step framework for exploring, creating and maintaining a CRP, it calls on the real-world experience of three individuals who, collectively, know what it takes to deliver robust retirement advice.
They are: Tony Slimmings, managing director of Paraplanning Hub, Richard Allum, managing director of The Paraplanners, and The Verve Group’s investment techspert Alasdair Wilson.
Here are some key learnings I’ve taken away from the guide:
Slimmings says you cannot just pick up somebody else’s CRP and try to implement it in your own firm.
You need to be able to stand up and explain convincingly to any client who asks what your beliefs, approach and starting point are. For that same reason, creating a CRP needs to be a democratic process within the firm, so every internal stakeholder feels real ownership of it.
It can be tempting to assume that a CRP is just about taking your CIP and switching it to income-generating investments.
But where the CIP focuses on suitability and investment selection, the CRP encompasses many more aspects of the planning process, including cashflow modelling, withdrawal strategy and longevity assessment.
The CRP is arguably a more nuanced and multi-layered beast, and the time you take to develop it must reflect that.
What goes into a CRP really depends on what you want to achieve. Is it business efficiency, a better regulatory audit, consistency in how each of your advisers articulates the retirement-planning process, or all three? The key is to focus on what everyone wants the CRP to achieve and bring together the elements that can fulfil that.
Wilson points out that combining a CRP with product governance rules, platform due diligence and your CIP streamlines the whole process and stops you from having to start afresh with every client.
But that does not need to compromise the uniqueness of each solution and client. Slimmings uses the example of a matrix approach, comprising five layers with five options in each. Through this system, you can demonstrate the consistency that the FCA expects while tailoring to client needs.
Do not expect your CRP to work perfectly from the off. Refining tools, questionnaires and investment choices may require practical experience to get right. Training may be required to get advisers up to speed on each element too.
Likewise, reviews are essential if you want to know how well your CRP is achieving what you set out to.
With retirement planning now accounting for over 60% of assets under advice, a framework that can enable firms to deliver robust retirement advice consistently and at scale is essential. What goes into it is entirely up to you.
This article first appeared in Citywire.
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