Dealing with the awkward squad.

3 min read 27 Aug 20

The good the bad and the complicated.

One of the conclusions from the research NextWealth carried out for us, earlier this year, was that a Central Retirement Proposition (CRP) should be a framework within which financial planners advise clients in retirement. It should be broader than just the investment proposition to support retirement income. It should be flexible enough to cope with all of the nuances that can come with the multitude of objectives clients have as they approach and enter retirement.

This fits in nicely to a lot of the work that advice firms have been doing to meet their PROD obligations. Identifying the broad target market, breaking it down into more granular client needs and objectives and coming up with solutions that then satisfy those requirement. It’s unlikely  that when you’ve done this you’ll have covered off 100% of your current or future client base as a target market (or client segment).

Each segment needs to make up a meaningful proportion of your business. This could be client numbers or AUA – but it needs to be meaningful.

So what do you do with the outliers? Well you could refuse to work with them as they don’t fit your proposition or you could build in some of the flexibility quoted in our CRP research and create a segment particularly for these non-standard clients, after all they can quite often be the most interesting ones!

At M&G Wealth we think our proposition has some USPs that can fit nicely into this non-standard segment. The ability for DFMs to run bespoke portfolios, keeping the client in full view and control of the adviser, allows firms to position this service over a wide range of outlier issues. So an investment manager is literally building a portfolio specifically for each client’s requirements. It’s great for clients with CGT issues in equity or OEIC portfolios where the investment manager can manage out that gain in a controlled manner. It could be a client requiring a specialist DFM to run an AIM portfolio for IHT purposes using Business Relief. Perhaps the client has complex existing assets and requires a multi asset bespoke income solution. They may have specific ethics, values or religious beliefs that make a fund or model portfolio unsuitable.   We find this with a lot of trusts and charities. 

The thing is, identifying and having a go-to solution for your outlier clients not only helps meet some of your regulatory requirements it can also make your life a lot easier. You understand the complexities and issues in mitigating a client’s complex tax, planning or investment needs. You’ve just outsourced the detail, but most importantly you’re still in control of the relationship.