Recent Published Studies

Never mind the quality…

Much attention has been focused on suitability of advisers’ investment propositions. In a joint new study CWC Research and the lang cat will dig into this fascinating subject in detail.


Post RDR, the focus on adviser investment propositions has never been greater. With the regulator taking a keen interest in how advisers research, create and maintain the investment portfolios they choose on behalf of their clients, advisers need to be concerned that they have adequately addressed suitability and be able to demonstrate that they have.

It is likely that adviser businesses will review due diligence processes and how they address suitability. This in many cases will result in changes to the providers of outsourced solutions. The budget pensions proposals, whilst providing opportunity, have exacerbated this problem. Advisers will be aware that PI cover will be prohibitively expensive or unavailable if they get it wrong. Asset managers, life companies and discretionary managers need to ensure their propositions are in line with regulation, on the one hand, but also in line with where adviser propositions will be in the coming months and years. This study will assist them in that process.

Who should buy the report?

    • Product providers looking to understand distribution dynamics
    • Platforms considering where to place development spend
    • Fund managers thinking of how to construct investment propositions that meet adviser due diligence
    • Discretionary managers looking at how their services might evolve
    • Advisers looking to identify best practice and avoid the pitfalls of their peers
    • Annuity providers keen to identify changes in adviser practice
    • Regulators and compliance experts looking to understand adviser behaviour
    • Participants in markets outside the UK who are going through their own version of the RDR

To order or find out more email us.

For a brochure: click here.

Fund share pricing

It is received wisdom that economies of scale lead to pricing advantage across industry and commerce. The banning of rebates by the regulator has unsurprisingly resulted in larger platforms considering options that maintain their scale advantage. At the same time, asset managers are considering their propositions.

It is likely that outcomes will be more complex than anticipated as fund managers, DFMs, advisers and platforms all seek to maintain or improve their competitive position. Will asset managers favour distributors over platforms? Will platforms seek distribution partners? Which distributors will qualify? How will platforms and distributors not offered discounts react?

We deem it important for all stakeholders to have the best possible intelligence on what impact changes will have on the market as a whole and are carrying out a study in association with IFDS.

No small change

Benchmarking the adviser business

No one can be certain what the successful advisory business will look like in a few years time, once the new regulatory regime has settled in. The one certainty is that we will see a migration from the majority of firms being broadly lifestyle businesses to a landscape dominated by professional practices run on standard business principle. Our guide aims to create a set of target benchmarks for these practices, one that we will develop over the coming months and years.

Some of the really key issues we address are:

  • What is the minimum viable size of an advisory business?
  • What are the pros and cons of outsourcing tasks such as investment management, compliance and report writing?
  • Are clients the clients of the adviser or of the firm?
  • What plans are there for succession – for owners AND clients?
  • What are the target financial ratios for a successful practice?

The full report is available in pdf click here.

Minimum optimal size
The increased regulatory load and the much greater research requirement mean unavoidable fixed costs are much higher and will need to be amortised across more business. We estimate that the minimum optimal size will probably be three advisers plus management and support – probably a total of 10 – 15 people in all.

Client acquisition
In a fee-based world, costs not recovered in year one will create a financial drag to be recovered in the annual fees. Those with lower acquisition and onboarding costs are likely to offer a more competitive annual fee or make greater profit.

Investing the money
The regulator’s demand for consistency of advice across the business will mean that most firms adopt Centralised Investment Propositions (CIPs), subject to suitability, of course. Firms will be expected to have demonstrated due diligence in selecting their investment solutions. The majority will outsource the actual investment management to experts, whether the structure is DFM, risk-rated portfolios or managed funds.
Research – when is enough, enough?

Advisory businesses face two specific challenges regarding investment research and investment management resource. First, they have to meet the regulatory requirement, a bar set very high for IFA status. Second, they have to support a proposition that they believe will prove compelling to clients. The largest investment/research spend in the sample equated to 32 bps on AUM.

Delivering the advice
Advisers are appreciating that consistency, cost management and efficiency are prerequisites. In addition to the employment of CIPS, we are seeing a very significant increase in the use of planning tools. Risk assessment tools are becoming mandatory; reporting and analysis tools are not far behind; cashflow analysis is increasing in popularity, albeit usage is still lower than one might expect.

Management information continues to be very poor. Despite the fact that time is the prime adviser resource, only a tiny minority measures time. Thus, very few firms know whether clients are profitable or not.

What do we mean by review?
In the past, reviews were largely limited to clients from whom more business was deemed likely. Now, they are core to most propositions. Many advisers are planning to increase the number of reviews. Not only is this likely to prove unprofitable, it also unlikely to be welcome by the many clients once they are aware of the cost. Advisers may have to consider different ways of maintaining client contact e.g. videochat, email, phone. Much of what was delivered at the annual review is now freely available online at any time.

Right people, right jobs and right rewards
The scarcest resource is the adviser who sells the proposition. Most firms struggle to recruit enough quality advisers, it is important that the tasks they perform are limited to appropriate client-facing activities, before an internal adviser or paraplanner takes over the technical client work. All tasks should be performed by a fully competent individual at the lowest cost, from senior adviser to administrator. In this way, the client receives better service, the adviser is able to generate more business and carry out more client reviews and the business is run efficiently.

Whose client is it?
It is important that the client can always contact someone who can help with whatever issue he has. This might be the practice manager, specialist, adviser or paraplanner. The day-to-day contact could be the practice manager. Advisers will leave, retire, become ill or simply be unavailable. It is important that the client is the client of the firm and not an individual adviser. Thus, he will receive appropriate service today and continuity of service in the future, possibly long after the original adviser has retired.  Moreover, there is little point to building value within the firm and a trusted brand and then allow the lifeblood of the business to migrate with advisers.