How CIPs are the real VIPs in any advice firm

Speaking at a seminar recently, it became scarily apparent how little notice adviser firms had taken of the FCA’s PROD (Product Intervention and Product Governance) regime.

The general feedback was that this wasn’t aimed at IFAs; it was classic compliance that didn’t match their business model and was therefore largely irrelevant to them. That and the fact it crept in alongside the much louder and boisterous MiFID ll legislation.

However, despite its seemingly shy nature, ignore it at your peril.

While the majority of the PROD regime is directed towards providers, there is an element that directly affects adviser firms. The wording is: “A product recommended by an adviser must meet the needs of an identifiable target market, by appropriate distribution channels.”

The keyword here, I suggest, is ‘identifiable’. The FCA will be looking to firms to reassure it that they identify their current and future clients, and that any advice or product recommended to them is uniform across the business.

While the majority of the Prod regime is directed towards providers, there is an element that directly affects adviser firms

Client segmentation

This lends itself to robust client segmentation, of which there are good and bad practices. For example, segmenting your clients on their life stage and potential advice needs = good; segmenting them on the amount of cold, hard, dirty cash they have = bad.

Client segmentation then naturally leads into a situation whereby you can create centralised investment and retirement propositions for your different levels of client, simplifying your processes and reducing the amount of research man-hours dramatically. Your paraplanner will be eternally grateful.

Once you have your segmentation nailed and your CIP up and running, this leads nicely into your platform and provider due diligence, further simplifying the research process and ensuring that your clients are all treated fairly; the aim of the game. They have access to the same process across the board, regardless of who they interact with at the firm.

Segmentation can be done once, and reviewed only when you feel it is necessary. It does not have to cover every eventuality as long as you state that you have accounted for outliers.

CIPs and platform and provider due diligence can be conducted annually, with whole-of-market research needed only for those situations where a client does not meet your segmentation criteria. Imagine the time you will save and how you will spend it. I would suggest seeing more clients, but of course, golf has its merits too.

It’s why CIPs (and any centralised research strategy) really are the VIPs of the advice process. Plus you’ll hit your PROD requirements without being prodded. Irony…

Jo Campbell – Director of Quality and Operations at Para-Sols.