One of the main benefits of a centralised investment proposition (CIP) on platform is that it enables consistent, risk-based client outcomes which neatly meet the requirements of the Client Suitability Review.
However, with the ever-increasing amount of industry regulation in force, in particular the Financial Conduct Authority's recent Product Governance (PROD) rules under MiFID II and the Insurance Distribution Directive, a Client Suitability Review is as much about ensuring compliance is met as it is about assessing a client's attitude to investment risk.
The PROD rules and tailoring propositions accordingly
As a quick recap, the PROD rules were introduced to ensure that advisers recommend the most suitable investment products and tax wrappers for their clients to help deliver appropriate outcomes.
For advisers running CIPs on platform, the PROD rules make it clear that the investment solution on offer needs to be broadly suitable to meet the needs of whatever segment of client it is designed for.
Most adviser firms do have some form of client segmentation in place and the PROD rules simply build on this by requiring advisers to identify target markets in relation to the products and services the firm offers.
How to approach a target market assessment is very much dependent on the adviser firm but, in general, recognising the differences between various client segments, their differing needs, and how best to support these needs, should be core.
In a nutshell, the PROD rules want adviser firms to show that the key elements of their proposition - service, advice and investment management - have been tailored accordingly.
Continuing to support advisers with new platform technology
One of the reasons we continue to develop innovative technology on Standard Life Wrap is to help make a difference so adviser firms can continue to be successful and provide value to their clients.
Our latest innovation, Individually Managed Accounts (IMA), can support advisers to achieve tailored outcomes for clients on platform in an efficient, streamlined way while ensuring their PROD obligations are met.
The PROD rules focus on the suitability of investment and tax wrapper solutions for each client segment. IMA makes it possible for advisers to achieve suitable tailored solutions for client segments that are not available through Separately Managed Account portfolios, while keeping these tailored solutions within a CIP on platform.
The technology enables advisers to work with discretionary managers to deliver these solutions and in a truly scalable and cost effective way without expensive manual interventions.
The adviser continues to be responsible for all client suitability requirements and for deciding the investment strategy depending on the client's risk appetite and the client segment. The adviser can service the client segment's tailored solution with a mandate where the adviser sets the rules. This solution can then be monitored and reported on.
While the adviser continues to carry out the client administration on platform, the investment management within the IMA portfolio solution is being managed by the discretionary manager using the IMA technology to make exclusions and substitutions for assets as required.
Technology that helps to make a difference
Although one of the key benefits of a CIP on platform is that it enables consistent, risk-based client outcomes, meeting regulations and the PROD rules is an area where IMA on Standard Life Wrap can come into its own and help support advisers with their compliance responsibilities.
From the client's perspective, IMA means more tailored and better outcomes in a more efficient and cost effective way. From the adviser's perspective, IMA means they can meet their PROD responsibilities while continuing to manage a CIP on platform, operating a consistent house process with their chosen investment proposition for their target markets.
IMA is technology that responds to the increasing demand for tailored investment outcomes, so supporting advisers to continue to be profitable businesses.
Speak to your usual Standard Life contact for more details about how next-generation technology on Standard Life's Wrap platform can help you meet your PROD obligations, or take a look at our Individually Managed Accounts web page.
For more information on the PROD rules, go here.
The value of investments can go down as well as up and your clients could get back less than they paid in.
The views expressed in this blog should not be regarded as financial advice.