CIP migration could be another RDR-linked banana skin for IFAs, warns FSA
The FSA’s latest Guidance consultation linked to Centralised Investment Propositions (CIP) and Replacement business broke earlier this month and is already attracting much comment in the ‘Twitterverse’ and in the financial trades.
It focuses on the advisory process around selection of discretionary investment management, portfolio advisory services and distributor-influenced funds by advisors for their customers. RDR has demanded IFAs review their ways of working. Many have fixed on new strategies in order to secure their futures in the commission-free Adviser Charging world which will be forced on them in just over seven months time.
Many IFAs understandably have arrived at the conclusion that they need to focus their energies on what they do best and outsource other activities to specialists so they can focus on offering high quality advice and service to their customers post RDR.
Many IFAs have taken the view that they need to outsource their customers’ investment management to experts if they have not done so previously. Many IFAs have selected discretionary
investment managers and understandably are keen to move as many customers as possible into them; others are busily migrating customers into platforms and advising clients to move their assets into platform-based funds.
With all this migration activity ongoing the FSA is keen to ensure the principles of good advice and TCF are being observed in this process. They want to make sure IFAs are not fitting square pegs into round holes or ‘shoe horning’ them just to make sure the IFA is ready for RDR. In short, RDR Readiness should not be at the expense of the customer. They recommend several safeguards to avoid this.
Key tenets therefore are:
Specific Disclosure requirements are as follows:
Specific Management Information (MI) requirements:
When selecting a third party CIP advisers are advised to consider the following:
IFAs that are in the midst of asset migration strategies but weighed down by regulatory requirements to segment, analyse and then communicate effectively and in a compliant way to
all their clients; might want to consider having a conversation with Legacy Asset Systems at
www.legacyassetsystems.com
Dunstan Thomas is partnered with this organisation which is now working with the likes Openwork and many other advisory firms as well as major platform providers including Ascentric.
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