The Top 5 benefits of a Centralised Investment Proposition

In a world that is saturated with choice, like that of the finance sector, its imperative to have an all encompassing view of the market and then have the ability to refine it down to the most suitable selections.

Often, if you've decided to go down the restricted route, the hard work has largely been done for you via the panels and processes that they will encourage you to adopt but what if your one of the thousands of Financial Advisers who are directly authorised and as such can advise on the full UK domiciled marketplace?

The vast majority will consider creating a 'Centralised Investment Proposition' which allows them to research the marketplace and then demonstrate via a thorough research process-why the providers on their panel are most suitable for the types of clients that walk through their doors.

Below I will summarise (my) Top 5 benefits of a Centralised Investment Proposition:

1) SAVING TIME; a good CIP (for products/platforms) is designed primarily around the benefits/features that a product can provide for a given client but its also an exercise in time saving. Whilst the D/A advisers can advise of the full spectrum of financial products-that spectrum is so broad that the admin constraints of having clients dotted between providers is inherently onerous and as such its more efficient to have panels that limit the propositions to anywhere between 2-10 providers per product.

If it were my CIP I would ideally like to have between 3-5 choices per platform and between 2-10 choices for products. That's a lot of research so make sure you have the best financial research tools to hand!

2) TREATING PEOPLE FAIRLY; A good CIP allows you to treat all customers equally whilst using their wealth only as a factor in regards to how best to serve them. A low net worth client might benefit more from lower admin charges and perhaps a passive approach to the underlying investment-in which case provider A-but the high net worth is likely to be more performance driven and the charges are not an issue if the stock is on the up so provider B!! Its fair to say that a retired, high net worth pensioner might be better off using a passive to maintain capital in retirement but these factors should be considered via the CIP and documented sufficiently.

3) COMPLIANCE; oh how we love and loathe this word! Lets be fair-its a necessary evil that you all have to adhere to in effort to keep the FCA satisfied and also in case of a grievance from a client. A good CIP should demonstrate why, at point of sale, your recommendation was the most suitable advice for the client based on their circumstances although I would always suggest that each client should have their own, individual client research report whenever you are providing advice. The main reason id do this is to demonstrate the value of my time and knowledge whilst also ensuring that any unique issues with a client's circumstances are documented and understood-something which cannot be adequately catered for in a CIP.

4) REDUCING BUSINESS RISK; we touched on this above but ultimately it falls down to the one word Advisers deal with more than any other-RISK! If your practice is too small and you have pots of money all over the place-keeping track of all this morning becomes a risk as does the need for remaining consistent between clients.

Naturally, a poorly designed CIP will also cause you trouble in the long run which is why its always best to consult with 3rd parties or your network or file checkers to see if they can give you a steer in regards to best practice or assistance.

5) TRANSPARENCY; a well designed CIP will be both efficient practice for your business whilst offering your clients the right choices for you to help them make.

Now, with the inclusion of MiFiD disclosure and the oft surprising results that it has thrown up, the financial sector has a responsibility to be as transparent as it possible. Having access to a research tool with MiFiD data should already be a priority for you if you've not already sourced this!

And that is what a CIP boils down to-its your transparent, best practice policy of how you serve clients fairly and reasonably based on their needs and requirements whilst also ensuring that you have jumped through all the hoops that the FCA would expect you too!

If you have nothing to hide then your CIP will help to demonstrate this to clients and compliance alike!

SUMMARY; CIP's wont be for everyone but they do serve an important purpose within the finance sector and should not be ignored or attempted half heartedly.

Id always recommend, if your starting up for the first time, speak to a 3rd party about a creating a CIP and invest your money in that help and learn from what they teach you. A CIP that your create with a 3rd party doesn't have to be a lifelong partnership but it could be the right mentoring that you needed during the infancy of your business which then spurred you onto to greater things!

I'm lucky enough to work with a number of Advisers regarding their CIP's and id also be happy to start a conversation with you-dear reader-if this is something that you'd like to explore with me.

I'm always interested in other peoples views on subject matter so if anyone has anything to add or feel that i've missed something, please do drop me a comment so that we can engage in a healthy dialogue regarding your point!

*****These views are mine own and do not necessarily represent the views of Defaqto******