CRPs: a question of when, not if

Many advisers have made good use of a Centralised Investment Proposition (CIP) for quite a few years, enabling them to provide their clients with a consistent investment service that meets the needs and objectives of specific client segments.

With a CIP in place, an advisory business can make sure their clients receive a high-quality solution for their investment needs, because the firm has committed sufficient time to investigate and pin down all the aspects involved in suitability, including platform providers, asset managers and funds.

No longer does this solid research have to be done for individual clients – resulting in considerably higher accuracy, and enhanced and simpler monitoring and reporting.

What’s interesting is that, while retirement planning has become more and essential within advice journeys, fewer advice firms have built a corresponding Centralised Retirement Proposition (CRP). Surely it’s crucial to adopt a genuinely robust, correctly client-segmented and clearly documented method of providing retirement advice. The FCA has repeatedly encouraged firms to take notice of its focus on this area, including PROD back in 2018 and lately via the regulator’s Thematic Review of Retirement Income Advice.

Thinking about advised clients’ expectations, as they start drawing down income from their pension pot(s), they’re trusting their adviser to do whatever is necessary to enable them to live comfortably during their retirement. This is no easy feat for firms, owing to generally increased longevity, the vagaries of global markets, and many clients’ lack of awareness about the need to plan a sustainable income.

Using a CRP offers firms a clear methodology for dealing with the needs of different client segments, signposting how to blend different types of products to ultimately provide each client with a tailored retirement solution. This should help mitigate emerging risks as clients transition from the point of retirement to later life. Moreover, this should also help clarify and simplify those tricky subjects – specifically longevity and income sustainability – so that clients not only grasp what they need to know, but also truly appreciate the value of the advice they receive.

It's also important to consider the reforms to pensions last Autumn by the Labour government in the Budget. From 2027, pensions will become subject to inheritance tax, which is likely to lead to more clients taking an income from their pensions. A CRP should significantly help advisers manage the risks and shifts associated with this behaviour.

As time goes on, pressure is growing on firms to make sure what they charge is fair and appropriate for each client’s needs. Evidence needs to be gathered that advisers and planners understand the products they’re recommending to individual clients, and that these investment options are genuinely in their best interests.

There’s no doubt to us at 7IM that running a CRP for decumulation purposes, in addition to a CIP for accumulation, is bound to deliver consistency, efficiency and cost effectiveness right across the firm.

There is no regulatory obligation to run a CRP. But it’s a certainty the FCA will be keeping a watchful eye on retirement income advice, given its findings in the thematic review published in March. And by using and regularly reviewing your CRP, you’d be evidencing your process for delivering retirement income to your clients, positive proof your firm is complying with the essence of Consumer Duty.

Our role at 7IM is to support you as you work to bring your clients a sustainable retirement income, minimising risk while helping clients understand the whys and wherefores of their retirement plan.

The 7IM platform can support multiple investment strategies (such as multiple DFMs/MPS) within a wrapper to facilitate a bucketing approach to investment. Indeed, we use this functionality for our Retirement Income Solution which can help you set up and manage your clients’ income across several time horizons, with the use of different tax wrappers in retirement.