News

Platform 3.0

At their recent Adviser 3.0 event, Timeline announced that they would soon be launching a new platform – this is currently named Platform 3.0.

The aim of this platform is to bring together all aspect so the adviser and client experience, such as fact find, risk profile questionnaire, cash flow, investment analysis, Letters of Authority and a client portal.

Timeline called this new platform an ‘integrated ecosystem built for modern financial advisers’.

The platform fee quoted by Timeline is a base fee of 0.15%, which is definitely competitive when compared to other platform fees on the market.

We will continue to look out for further updates from Timeline regarding this new platform, as it all sounds very promising for advisers and clients alike.

Defaqto MPS Comparator

Defaqto have announced the launch of MPS Comparator, which is the only tool which allows comparisons across MPS portfolios with similar characteristics.

In light of the Consumer Duty, MPS recommendations continue to increase. It is estimated that they increased by 14% in 2024, totalling £85.8 billion.

However, it can be a total minefield trying to work out which providers and portfolios are the most suited for your clients.

The use of MPS providers should be monitored regularly as part of firms Centralised Investment Proposition (CIP) as there could be changes which mean the current provider no longer matches your requirements, or there could be a new provider which offers a solution which is even more suitable.

We feel that this new MPS Comparator tool could be very effective when completing research into MPS providers.

However, if you don’t have the time to complete this research and then update your CIP, get in touch with us at We Complement and we will be able to assist with this.

Standard Life Smoothed Return Pension Fund

Standard Life and Fidelity have recently announced that they have partnered to launch a new Smoothed fund called the Standard Life Smoothed Return Pension Fund.

This fund will be available exclusively on the Fidelity Adviser Solutions platform, and it will be trialled with a number of advisers before being fully launched later in the year.

Smoothed funds are very popular with advisers as the provide a degree of re-assurance to a client that they wont be subject to the high volatility of other investments.

A number of Smoothed Funds are available on the market, most notably the PruFund range, with others available from providers such as LV and Aviva.

It will be interesting to see whether there is much demand for this fund, or whether advisers will continue to recommend the Smoothed funds already in the market.

However, we feel that the launch of a new Smoothed fund can only be a good thing, as it provides an additional option for both advisers and clients.

Interest Rates and how they can affect portfolios

As everyone is no doubt aware, inflation has been extremely high for what has felt like a very long time. In response to this, the Bank of England Base Interest Rate has recently risen to 5.25%.

In their most recent investment update, iBoss have stated that this has led them to revise the structure of Bond holding within a large number of their portfolios, such as increasing the duration of Bonds, increasing the exposure to a variety of different bonds and increasing the allocation to active managers over passive.

They state that many of their clients have looked to fill gaps in their portfolio with more complex strategies, such as Structured Products and Absolute Return funds. However the increase in Interest Rates will likely lead to an increase in Bond investments, and their subsequent long term performance.

They have likened Bonds to Margherita Pizza and Vanilla Ice Cream. They are not the most exciting choice for an investment, but they are classics for a reason.

This information was taken from the following page: Vanilla Ice Cream & Margherita Pizza

Active vs Passive

The debate regarding Active and Passive investments will likely continue for the rest of time. Both sides have vocal supporters who can provide data to back up their side of the argument.

According to AJ Bell 91% of UK pension funds have underperformed against a FTSE All Share Tracker over 10 years. Almost three quarters of these funds underperformed by 10% or more, and over a third underperformed by 20% or more.

While there could be many reasons for the underperformance of many of these funds, these will likely not mean much to the actual investor. If a client is paying the higher charges for an Active fund, they would probably expect to see good long-term returns.

We will not get into this debate, as we like to remain impartial and open to ideas of the firms that we work with.

However, we do think that advisers should consider the merits of both Active and Passive investments and see how they could work for their clients. There is no ‘one size fits all’ when it comes to portfolios, and an Active strategy might be right for one client, where a Passive strategy might be right for another.

Information was taken from the following page: Pension funds underperforming index trackers

Navigating the complexities of MPS providers and ensuring your Centralised Investment Proposition (CIP) or Centralised Retirement Proposition (CRP) is up-to-date can be challenging. At We Complement, we specialise in providing comprehensive support to financial advisers. Our expert services can help you research, select, and manage the most suitable investment solutions for your clients, ensuring you meet regulatory requirements and deliver optimal outcomes.

Contact us today to learn more about how we can enhance your CIP and CRP strategies, and ensure you’re always offering the best possible advice and solutions to your clients.

When was the last time you stepped back and took a good, hard look at your shop windows?

Bear with me here. My marketing career began as a 17-year-old shop assistant arranging stylish new shoes at Dorothy Perkins—affectionately known as Dotty P’s. The first task each day was to inspect the window display. Did it look inviting? Did it reflect current trends? Was it clean? Was the messaging accurate and consistent?

Fast forward 20 years, and I still apply these principles when evaluating our website and all of We Complement’s digital marketing content. By reassessing your digital marketing, you ensure that clients and prospective clients leave your “shop” with a positive, lasting impression.

At 17, I had mastered the art of selling shoes. My boss wisely told me, “If you can sell shoes, you can sell anything,” and she was right. With more vacant units on the high street, I transitioned from shop work to my current role at We Complement.

The lessons from my Dotty P days are just as relevant in financial services as they were in retail. Here are my tips to attract a steady stream of clients to your “shop”:

1. Embrace Social Media

Did you know the average person spends two hours and 24 minutes on social media daily? Find out where your ideal client spends their time and join them there. For professionals, LinkedIn might be ideal. For a younger demographic, Instagram or TikTok could be more effective.

Similarly, in retail, stores offering complementary items tend to be located close together. People like having everything they need within easy reach!

2. Plan Your Strategy

Jumping into marketing activities without a plan is like writing a story without knowing the ending. How can you identify what works and what doesn’t? At a minimum, document:

• Your main goal
• Areas where you might need help
• The amount of time you can dedicate
• The methods you plan to use

What’s the point of having stock in the window if you don’t have enough to sell?

3. Know Your Competitors

Understanding your market position and differentiating yourself from competitors will help tailor your marketing. If you serve high-net-worth clients, focus on issues relevant to them. If your clients have modest incomes, their concerns will differ.

For instance, if you specialise in funding long-term care, your content should resonate more with the recipients’ middle-aged children than with the care recipients themselves.

If it’s wedding or prom season, I’m showcasing occasion wear in my shop window, not jeans and boots.

4. Improve Your Website

A clunky website that isn’t optimised for mobile users and fails to answer client questions will hinder your efforts. Even minor issues like spelling mistakes or broken links can drive potential clients away.

Think of it as scrubbing sticky fingerprints off windows—it’s about making a good first impression.

5. Build a Strong Social Media Presence

Regardless of the platform, post consistently to keep your brand visible. Prioritise quality over quantity by sharing valuable content that informs, entertains, or persuades. Repurpose relevant content and share interesting posts. Mix up your content with carousels, static images, and videos.

Change your windows weekly to keep them eye-catching and fresh.

6. Show Your Existing Clients Some Love

Send regular newsletters to keep clients informed of industry news. Check in with friendly emails each quarter. Remember birthdays, and send Christmas cards. Diarise major milestones and acknowledge them—sending a graduation card to a client’s child, for example, can make you the most thoughtful adviser they know.

Avoid making every email sales-focused. A subtle check-in can remind clients it’s time for another appointment without appearing pushy. Always thank customers, even if they haven’t purchased—they’ll remember it when they return.

These insights should encourage you to view your digital marketing from your client’s perspective. What lessons from your past are still relevant today?

Ready to Transform Your Digital Marketing?

If you’re looking to elevate your digital marketing game, We Complement is here to help. Our expert team can assist with everything from social media strategies to website optimisation, ensuring your digital presence is as compelling and effective as possible. Contact us today to learn more about our tailored marketing support services and start attracting more clients to your business.

In the 2023/24 tax year, Inheritance Tax (IHT) has raised a total of £7.5 billion of revenue for the government, which represents an increase of £4 million on the previous year. Furthermore, new data published by HMRC on the 22nd May 2024, shows that in the first month of the new financial year alone, an additional £700,000 million in revenue has been raised via IHT. This figure is 7.2% higher than this time last year.

This significant increase is, in part, due to rising house prices, but also the freezing of the Nil Rate & Residence Nil Rate Bands (NRB & RNRB) at the current levels, until April 2028. Furthermore, additional revenue could be raised by the government through closing inheritance tax loopholes, according to the Institute for Fiscal Studies.

In this vein, Business Relief (BR) & Alternative Investment Market (AIM) investments have been gaining popularity, offering the potential for reducing inheritance tax liabilities after holding the investments for a minimum of two years.

Despite it having been a challenging few years comprising of rising interest rates, forced selling and poor liquidity, which ultimately resulted in a 45% fall in AIM 100 (from its peak in August 2021), AIM portfolios have generally shown strong performance over the past 12 months. At present, the investable AIM market is made up of around 120 companies.

Following recent updates from Octopus & Time Investments, delivered towards the end of April 2024, we have taken a look at the performance of some of their main AIM & Business Relief qualifying investment offerings.

Octopus Future Generations Venture Capital Trust (VCT)

The Octopus Future Generations VCT is a relatively young VCT with the first investment having been made in June 2022. It invests in businesses that aim to build a sustainable planet (making up around 13% of the portfolio), empower people (around 27% of the portfolio) or revitalise healthcare (around 60% of the portfolio).

In their update, Octopus commented that the populus consensus, together with recent regulation, has driven and caused higher demand for sustainable, socially responsible investments, and, since its inception, the Octopus Future Generations VCT has made investments into over 25 companies, with over £45 million having been raised within the VCT.

No follow on investments have been made as yet, however, and Octopus have advised that no dividends are expected from the sale of any companies until around July 2025 at the earliest.

As the investments are more concentrated during the early investing stages, younger VCTs typically carry a higher level of risk than more mature portfolios which tend to be better diversified. This therefore means there is the risk that some of the investments may go on to fail.

Having said that, Octopus have a large and highly experienced team investing in the Future Generations VCT, which has resulted in a consistent pipeline of opportunities & investors seeking them out rather than the team having to search for potential investments.

Octopus Titan VCT

Turning to the Octopus Titan VCT, over the 12 months between the 31st of December 2022 & the 31st of December 2023, the Net Asset Value (NAV) per share decreased by 14.5p per share, from 76.9p per share to 62.4p per share.

It should be noted, however, that this represents the NAV per share once the dividends have distributed. Prior to this, shares were valued at 67.4p per share.

That is not to say, however, that the Titan VCT is performing poorly.

If we look at the discrete performance over the past 9-year period between the 31st of December 2014 and the 31st of December 2023, despite the recent tumult in the markets, the Titan VCT has generated total returns of 28%.

Some of the most notable and recent successful exits from the Titan VCT include graze (exited to Unilever), Tails.com (exited to Nestle), SwiftKey (exited to Microsoft), & Ultrasoc (exited to Siemens), amongst many others.

TIME:AIM Portfolio

According to the Q1 2024 Performance Update of the 25th of April 2024, the TIME:AIM portfolio has materially outperformed the relevant benchmark (NUMIS Alternative Markets Index) over the previous 1, 3 & 5 year periods.

Since inception, the portfolio has generated total returns of around 22.5% (inclusive of dealing and management charges).

Furthermore, following a strong fourth quartile in 2023, some of this performance has been shared in Q1 2024.

Although fundamentally, TIME Investments operate on a buy and hold philosophy, there have been some recent portfolio movements which include companies having moved into the main market (Breedon), others having been bought out (EmisGroup, smsplc & Impellam Group) and a couple being sold as they were not performing as expected (Johnson & iOmart).

With these exits, however, came further acquisitions between Q1 2023 and the present, including companies such as Alpha, Tatton Asset Management, Cerillion, bioventix and Tracsis.

Outlook

In terms of looking ahead, the Office for Budget Responsibility have forecast a rise of around 6.3% in the number of deaths resulting in an IHT liability, over the following four year period.

It is expected that there will be a huge transfer of wealth from the ‘Baby Boomer’ generation over the following couple of decades and with there being numerous elections on the horizon, there is concern over how this might further impact the IHT landscape.

For more personalised advice and to explore how you can benefit from these specialised investments, contact us at We Complement today! Our team of experts is ready to help you navigate the complexities of IHT and make the most of your financial planning. Let us assist you in optimising your investments and securing a prosperous future.

📞Get in to get in touch.

Crafting Consumer-Focused Suitability Letters

Welcome to this week’s newsletter, where we delve into the art of crafting consumer-focused suitability letters. At We Complement, we’re dedicated to simplifying complex financial information to support positive outcomes for both advisers and clients. Let’s explore what consumer-focused letters entail and the benefits they offer.

Understanding Consumer-Focused Letters

Consumer-focused letters prioritise client comprehension and outcomes over mere compliance. These letters serve as a bridge, translating intricate financial advice into clear, digestible insights for clients. They encapsulate advice summaries, client objectives, associated risks and benefits, and the rationale behind recommendations. Moreover, they address client queries comprehensively, guiding them on the recommended financial path. Ultimately, these letters aim to prioritise client education and align outcomes with their financial aspirations.

The Benefits of Consumer-Focused Letters

There are several benefits, with the main one being increased customer understanding. By using clear and concise language and linking recommendations back to the client’s objectives, customers will be able to easily understand why the recommended product or service is suitable for them. This will not only increase their confidence in your advice but also lead to better outcomes for the customer.

Another benefit is the reassurance that they will meet regulatory requirements. The Financial Conduct Authority (FCA) place a strong emphasis on ensuring that customers are treated fairly and receive advice that is suitable for their needs. By writing letters that are customer-focused and demonstrate a thorough understanding of the customer’s needs, firms can reduce the risk of regulatory action being taken against them.

Finally, by simplifying suitability letters and making them more engaging, firms can enhance their reputation and build trust with customers. A well-written letter that demonstrates a deep understanding of the customer’s needs and objectives can help to differentiate a firm from its competitors and foster long-term relationships with customers.

When crafting a suitability letter with a consumer duty focus, it’s important to ensure that it contains all the necessary elements to provide a clear and thorough understanding of the recommendation being made. Here’s what should be included:

Essential Elements of Consumer-Focused Letters

Crafting consumer-focused letters requires attention to detail and inclusion of vital components:

1. Client Goals and Priorities: Clearly articulate the client’s objectives.
2. Current Situation Overview: Summarise the client’s existing investments.
3. Rationale for Recommendations: Explain how recommendations align with client needs and objectives, including associated risks.
4. Balanced View: Present advantages and disadvantages of the recommended product.
5. Focused Advice Implications: Detail the implications of the advice provided.
6. Comparison (if applicable): Provide a clear comparison between old and new plans if replacements are involved.
7. Costs and Charges: Clearly explain financial implications, including costs, charges, and penalties.
8. Tax Implications: Address tax implications for the client.
9. Further Details: Include a section for specific client information.

At We Complement, we integrate these elements into our templates to ensure clarity and compliance. Whether you need a tailored suitability report template or updates to existing ones, our team is here to assist.

Contact us online or call 01472 728 030 to discover how we can create engaging, compliant templates that represent your firm effectively.

Ever noticed how even the simplest tasks in our daily lives are comprised of a series of steps? From brewing that essential morning coffee to navigating through rush hour traffic, processes surround us. Yet, it’s in our professional environments where process mapping truly shines.

Your clients expectations are constantly evolving, so staying ahead requires more than just delivering exceptional products or services. It demands a keen focus on the inner workings of your business, ensuring that every cog in the machine is well-oiled and functioning optimally.

Process mapping is akin to creating a visual storyboard of workflows and tasks. While it may seem mundane to dissect personal routines, in a collaborative setting, process maps become invaluable tools, bringing clarity and efficiency to everyone involved.

Delving deep into a process reveals its intricacies, allowing businesses to pinpoint inefficiencies and bottlenecks ripe for improvement. Not only does this foster clarity in roles and responsibilities, but it also streamlines operations, potentially saving both time and resources.

Tidying up

This is where the concept of “housekeeping” comes into play. Just like maintaining a clean and organised home, businesses need to regularly tend to their internal affairs to operate smoothly and efficiently. However, amidst the hustle and bustle of daily operations, these “housekeeping” tasks often get pushed to the back burner, overshadowed by more pressing priorities.

Neglecting these tasks can have far-reaching consequences. From unchecked expenses draining resources to outdated processes hindering productivity, the repercussions of overlooking business housekeeping can be significant. That’s why it’s crucial to carve out dedicated time and resources to address these matters proactively.

By leveraging technology, such as CRM systems, businesses can streamline their housekeeping efforts, automating reminders and tracking progress with ease. Whether it’s conducting regular audits of expenses, updating internal documentation, or reviewing IT systems, having a robust system in place ensures that nothing slips through the cracks.

Consider setting aside dedicated time, like a half-day session, to align your team on essential housekeeping tasks. Define the checks, frequency, and responsibilities clearly, then integrate them into your CRM system. This not only automates reminders but also ensures continuity, even in the absence of specific team members. Involving your team in the housekeeping process fosters a sense of ownership and accountability, driving engagement and efficiency across the organisation. By collectively identifying pain points and implementing solutions, you not only improve day-to-day operations but also cultivate a culture of continuous improvement.

At We Complement, we understand the importance of meticulous housekeeping in driving organisational success. Let’s collaborate to integrate these practices seamlessly into your workflow. Give us a call, and let’s chart your course towards efficiency and success together.

So, don’t let your business drown in a sea of clutter and inefficiency. Take the time to roll up your sleeves, get down and dirty, and clean up those everyday tasks. Your bottom line—and your sanity—will thank you for it.

Welcome to this week’s newsletter! At We Complement, we’re dedicated to offering comprehensive support to financial advisory firms like yours. Our approach transcends mere reporting; we strive to seamlessly integrate into your operations, ensuring perfect alignment with your goals and values. This week, we’re excited to share insights on 5 things we need to know when you begin a partnership with We Complement.

1. We need to know your Centralised Investment Proposition and Centralised Advice Framework

As part of our thorough onboarding process, we prioritise understanding your business holistically. By delving into your central processes, such as the Centralised Investment Proposition (CIP) and Centralised Advice Framework (CAF), we seek to enhance efficiency and consistency in your service delivery. These frameworks not only satisfy regulatory requirements but also instill confidence in your clients, fostering long-term trust and loyalty.

2. Risk profiling tools

Moreover, our expertise extends to risk profiling procedures, where we guide you in selecting the most suitable tools and documenting crucial client discussions. This meticulous approach ensures that your advisory decisions are well-informed and compliant with industry standards.

3. Annual Review process & Templates

In our recent poll conducted this week, we discovered that a significant 60% of advisers believe their Annual Review process could benefit from enhancements. As part of our onboarding procedure, we’ll request to review your templates to better understand your current approach. At We Complement, we understand the pivotal role of customisation in the annual review process. That’s why our in-house templates are designed to go beyond the ordinary, providing comprehensive explanations that not only resonate with clients but also fulfill stringent compliance requirements.

4. Are your client files in a good place?

Additionally, our collaboration extends to your internal compliance and file-checking procedures. By aligning with your established protocols, we guarantee that our work meets your compliance expectations, minimising risks and enhancing operational efficiency.

5. Where do we fit in amongst your in-house team?

Integrating closely with your administrative team streamlines processes, allowing you to focus on delivering exceptional financial planning services. This collaborative approach improves client satisfaction and cultivates a culture of excellence within your firm.

At We Complement, our commitment to your success extends beyond the initial onboarding process. We view our partnership as a continuous journey, where we remain dedicated to supporting your firm at every stage of growth and evolution. Whether you’re navigating regulatory changes, expanding your client base, or exploring new avenues for innovation, we’re here to provide strategic guidance and practical solutions. Our team of experienced professionals stays abreast of industry trends and best practices, ensuring that our support remains relevant and valuable in an ever-changing landscape. By choosing to collaborate with We Complement you gain a trusted ally who is invested in your long-term success.

If you would like to discuss this and other ways your business could benefit from working with us, please contact us online or call 01472 728 030.

I’ve completed dozens of bond surrender cases this year, and encountered several recurring themes and common pitfalls when dealing with bond surrender calculations. These calculations can be fiddly, especially if you haven’t dealt with one for a while. Dealing with changing regulation on certain aspects (I’m looking at you, top slicing relief) can make it easy to overlook or forget certain aspects. I hope this blog is a helpful memory jog on the more finicky aspects of bond surrenders.

Unintended Consequences

• Student loan repayments: Remember that bond gains are taxable income, so even if there’s no tax due on the gain, a bond surrender could lead to the recipient having to repay more of their student loan. Depending on their circumstances, this might be taken from their salary via PAYE.
• Tapered personal allowances: Similar to the above point, there might be no tax to pay on a gain, but the gain might increase the client’s annual income to a level that they lose an element of their personal allowance.
• Care costs: As long as the investment isn’t treated as a deliberate deprivation of assets, bonds are often ignored by a Local Authority when a client is being means-tested for care funding. This is something to be aware of if an older client who has held a bond for a long time is considering surrendering it and holding it as cash, for example.

Bonds in Trusts

Normally, a bond gain falls on the policyholder and becomes part of their income for tax purposes. This is similar for absolute trusts, where the gain falls on the beneficiary.

For bonds held in other types of trust, the rules are a little different:

• If the settlor is a UK resident and alive in the tax year of the gain, the gain falls on them. The settlor can reclaim any tax they pay from the trustees.
• If this isn’t true of the settlor, the gain falls on any UK resident trustees. Note that the old £1,000 standard rate band has been removed, so all gains that fall on the trustees are taxed at the trustee rate of 45%. If the trust only receives income below the allowable tax-free amount (usually £500), then the trust doesn’t have to pay income tax. If the trust receives more income than the tax-free amount, tax is due on the whole amount of income.
• If there are no UK resident trustees, the gain falls on the UK beneficiaries.

The Timing of Bond Gains

This is a small but easily overlooked point: the two types of bond gains are taxed at different times.

Surrendering whole segments will result in taxpayers having to pay any tax on the gain in the tax year the surrender was made.

On the other hand, if you make a withdrawal across all segments, the tax on the gain will be payable in the tax year that the policy year ends in. For example, take a withdrawal made via this method on 1st April 2024, where the policy year ends on 1st September 2025. The withdrawal takes places in the 2023/24 tax year, but the gain will be taxed in the tax year that 1st September 2025 falls into, i.e. the 2024/25 tax year.

Order of Tax

Onshore and offshore bond gains are savings income, and they can both potentially make use of the Personal Savings Allowance and Starting Rate for Savings. However, they’re not treated identically for tax purposes.

Onshore bonds are treated as the top part of income, and are taxed last, after non-savings income, other savings income and dividends. Offshore bonds slot in with other savings income, so are taxed before dividends and after non-savings income.

Top Slicing

Interaction with Personal Allowance, Personal Savings Allowance and Starting Rate for Savings

There have been some recent changes to these rules which can catch you out if you don’t deal with bond surrenders regularly.

In mid-2023, HMRC updated their guidance on how the above three allowances interact with top slicing relief. Prior to this updated guidance, when calculating the tax due on the average gain for top slicing purposes (step 4 of the calculation), you used the client’s income plus the full gain to determine whether the PSA and SRFS were available. On the other hand, eligibility for the Personal Allowance was based on the sliced gain, so you could potentially reinstate the Personal Allowance.

After the updated guidance, for step 4 of the calculation, the amount of PSA, SRFS and PA the client is eligible for is based on the sliced gain, not the full gain.

It’s important to note that this is only applicable to step 4 of the calculation, and not the calculation as a whole. Nevertheless, this could still result in some clients paying less tax.

Eligibility

Only individuals can claim top slicing relief. As bonds in absolute trusts are typically taxed, as though the beneficiary owns the bond, beneficiaries of absolute trusts can also claim top slicing relief.

For other types of trusts, if the trust assigns segments to a beneficiary, that beneficiary can claim top slicing relief going back to when the bond was established. Trustees cannot claim top slicing relief. Settlors can claim top slicing relief.

Top Slicing Years

Working out how many full years to use in a top slicing calculation can be tricky, as it depends on whether the bond is onshore or offshore, the type of surrender, and when the bond was established.

If you’re surrendering the whole bond, or whole segments, you can use the number of full years since the bond was established.

If the gain has been caused by an excess event (taking a withdrawal above the 5% allowance from across all segments) and the bond is onshore, you use the number of full years since the last excess event. In this situation, but with an offshore bond, it gets a bit more complicated. Luckily, there are some handy flowcharts available online. I have used the one below from Canada Life as an example.

This is just a quick roundup of some of the things to look out for when doing a bond surrender calculation. Are there any other tricky areas that might catch you out when doing a bond surrender?

As we begin this new tax year, it is crucial to start with the right questions. Reflecting on the past three months, was it business as usual with your annual reviews? Or did last-minute ISA top-ups from the usual suspects consume your time? If the latter resonates, you might face a significant backlog. So, how do you plan on catching up?

Financial advisers are required by the regulator to provide clients with full suitability reviews annually, ensuring compliance with regulations (FCA COBs 9A 3.6-9).

If you’re finding yourself falling behind, catching up without the right resources can be daunting. This week’s post aims to help you kick off on the right foot by establishing the correct processes. Allocate time amidst the post-tax year-end lull to contemplate your client’s annual review process.

Proactive Scheduling:Ever wondered about the ideal timing for contacting clients to schedule review bookings? We’ve honed our approach and found that reaching out one month in advance works best. This strategic timeframe allows for ample preparation on both ends. Ensuring both you and your client are primed for a productive discussion that drives progress and success.

Preparation: When preparing for client meetings, we view it as a two-part task. Part one begins with our initial contact to arrange the review meeting. During this phase, we provide the most recent compliance documents and request any additional information necessary for the meeting or file.

Once the meeting is scheduled, we move on to part two of our preparation process. This involves assembling our client meeting packs, a task that demands meticulous attention to detail. Within these packs, we include comprehensive summaries of portfolio performance, updated financial goals, and personalised recommendations. All of this information needs to be pulled together just before the meeting to ensure that clients receive the most up-to-date insights and advice tailored to their needs.

By starting this preparation process early, each review is conducted with thoroughness and precision, ultimately delivering maximum value to your clients.

Efficient Tracking: To ensure seamless operations, a robust tracking system is indispensable. At We Complement, we’ve designed a sophisticated solution that goes beyond keeping tabs on upcoming reviews. Our system meticulously highlights any overdue appointments, providing clarity on each client’s review journey and the subsequent steps required. This proactive approach empowers you and your team to maintain full control over your workload, ensuring that every client receives the attention they deserve without the risk of falling through the cracks.

Timely Documentation: It is worthwhile for advisers to set aside a weekly ‘admin day’, giving themselves time to follow-up meetings promptly with the correct documentation or handing over to a paraplanner. We’ve heard of clients waiting months for the review letter. By prioritising documentation and streamlining the delivery process, you can enhance client satisfaction and build trust in your services.

Back-Office Systems: We advise our partner firms to leverage their back-office systems to track due reviews, and sign off upon delivery. If your system needs enhancements to alert you of impending reviews, We Complementcan implement these workflows seamlessly.

Do you have a process in place that monitors your review process? It’s crucial to extract the data, ensuring a high-level view of your company’s performance. Remember, failure to deliver reviews correctly could lead to complaints and fee reimbursements.

In small or medium-sized businesses, we understand you can be pulled in every direction. That’s where we come in. We work with firms to establish review processes, manage the flow of reviews, book appointments, and prepare review packs. Our paraplanners offer technical support to you and your advisers, even if it’s just to discuss a case.

If internal resources are lacking, let us be the extension of your team that you need. With We Complement, you can ensure your clients receive the attention they deserve while optimising your operational efficiency.

One of the common misconceptions our paraplanners see is that attitude to risk trumps capacity for loss, when it’s more likely to be the other way around. While a client may have the appetite for risk, they may not have the financial ability to absorb any losses that result from a higher-risk investment.

As part of the recent thematic review of retirement income advice, the FCA wrote-

“ATR  is a subjective measurement of an individual’s willingness to accept risk while CFL relates to their ability to absorb losses. ATR and CFL are both key elements of risk profiling. When moving from accumulation to decumulation it is likely that the ATR and CFL for many customers will change so needs to be reassessed”

The FCA has reported that some firms are not assessing CFL for customers. Neglecting Capacity for Loss (CFL) in the decumulation phase can result in firms inaccurately pinpointing suitable income or investment-based solutions for their clients. This oversight may prompt customers to undertake excessive risk, potentially subjecting them to income reductions that exceed their ability to endure.

That’s why We Complement feels assessing capacity for loss is a vital part of many suitability reports and a concept that all paraplanners are familiar with. Read on to discover five important points you need to consider when assessing a client’s capacity for loss.

1. The Financial Conduct Authority (FCA) requires the capacity of loss to be considered

In March 2021, the FCA published its Finalised Guidance on Assessing Suitability. In it, the authority defined capacity for loss as the following:

”The customer’s ability to absorb falls in the value of their investment. If any loss of capital would have a materially detrimental effect on their standard of living, this should be taken into account in assessing the risk that they are able to take.”

The statement follows the FCA’s 2017 Guidance Consultation document, which requires Advisers to consider a client’s attitude to risk as part of assessing suitability. It goes on to add that:

“The client’s capacity for loss (the client’s ability to absorb falls in the value of their investment) should also be taken into account.”

2. Several factors influence your client’s capacity for loss

When considering your client’s capacity for loss, there are many aspects of their financial situation that need to be considered carefully. These include:

• Income needs
• Present and future income sources
• Other assets
• Expected inheritances
• Time horizon before the investment will be drawn upon.

Once considered it’s vital to ensure that you make detailed notes in the fact-find.

3. There are two types of losses

Broadly speaking there are two types of loss advisers need to consider: permanent and temporary. The prospect of a client suffering a loss that they have no chance of recovering is different to a loss that they can expect to recover over time.

It’s important to assess this and understand whether the client could withstand one of these types of loss but not the other, both, or neither.

4. Understand the difference between the client’s willingness to accept risk (attitude to risk) and their ability to withstand it (capacity for loss).

While capacity for loss and attitude to risk are distinct from one another and should be assessed separately, it’s important to also consider them together. This will provide a balanced view of your client’s situation.

For example, if a client has a low capacity for loss but says they’re willing to take a high degree of risk, it’s likely that their capacity for loss will be the limiter on the solutions you recommend.

5. Cashflow modelling is a good way to determine capacity for loss

There is no single correct way to assess capacity for loss, and different advisers prefer different methods. Cashflow modelling is typically the most precise way of assessing capacity for loss, as you can calculate a loss in percentage terms and see how this interacts with your client’s cash flow forecast.

Capacity for loss questionnaires are also popular, or you could look at the client’s income requirements and how this could be affected by any loss made.

Get in touch

If you would like to discuss capacity for loss in more detail, or how we can ensure that your suitability reports stand up to scrutiny, please contact us online or call 01472 728 030.

I have always believed a firm should have its own bespoke CRP. I also believe that, if anyone is ever going to have a financial planner engaged, it should be in retirement. However, there are several elements’ adviser’s must know when commissioning or preparing such propositions.

Ongoing suitability

Firstly, ongoing suitability; it is important here for advisers to remember that pension drawdown is not a product, it is a pathway. It may be something to consider once a client is in retirement and looking at possible decumulation, but the bigger picture needs to be considered.

As we all live longer, retirement comprises several stages, from the first flush of activity filled with holidays and grandchildren to the latter years, which may feature ill health and the need for fully supported accommodation.

All clients are unique but do share common fears, concerns, and desires for superior quality of life at all ages but especially in retirement. People have diverse ways of achieving those desires, so, rather than shoehorning every client into flexible drawdown solutions, advisers must always focus on what is right for the client.

Therefore, regular reviews are vital because, whilst it is important to have a plan, a cash flow forecast or similar, at the start, once that plan has been drafted, its value and accuracy will erode. Therefore, an adviser’s role and advice becomes critical. Ensuring that any plan remains suitable during the clients’ differing retirement stages, rather than concentrating on individual products.

An effective CRP is not about how money is invested; it must consider each client’s behavioural biases, health issues, and legacy plans. It involves difficult discussions, handled sensitively – after all, none of us want to leave this mortal coil but we are all going to, and an adviser must be that critical friend making sure the pathway is suitable.

Because assessing a client’s attitude to risk and capacity for loss is not just terminology to tick off; it should be part of an overall ongoing discussion document that paints a unique picture of each individual’s life.

Sustainable withdrawal rates

As highlighted in the excellent book ‘Beyond The 4 per cent Rule: The science of retirement portfolios that last a lifetime’ by Abraham Okusanya, we need to think differently about income drawdown sustainability and consider different income solutions for different client’s income needs. This change in mindset will not be easy and the requirement for a new solution to a new problem has not been universally embraced by the advisory community.

In my 30+ years in the financial planning profession, we have seen the many recessions and financial crises, such as the tech meltdown of 2000 to 2003, the great recession of 2008, and a pandemic. No one saw any of these coming, which highlights the importance of having investment portfolios built in such a way that clients have a plan to get through 40 years of retirement.

Any adviser who writes up a plan and sends retirement clients on their way is not doing the job properly, in my view. They need to be tapping the tiller at least every six months to make sure that the clients’ withdrawals are still suitable for their retirement stage and continue to be sustainable.

Everything should start with the individual client and, as much as possible, their personal health and longevity position, not the mass market and lazy use of ONS averages. Every client will have their own requirement for income, their views on what core (essential) income is, their own mix of pension savings, debts, and liabilities, their own needs, and circumstances, and their own views on what investment risks are acceptable. It will be different for everyone and so everyone will have their own view of Safe Withdrawal Rates (SWR).

One way to define and evidence the SWR applicable to each individual is to approach it from two perspectives.

One. Ask the client to define their income needs, and split between essential expenditure and discretionary spending.

Two. Understand and establish the ‘controls’ for each income stream. The moving parts can explicitly define how the SWR is achieved.

Drawing up a CRP

An effective CRP is a starting point as a template for each client and ensures, while they may all end up in a different place, they have all been through the same process. It should be a document that can apply to a retired doctor, or a retired dustman; both will go through the same discussions and end up will be in the right place for them.

Below is a checklist of the areas to consider when developing a CRP or retirement planning process:

• PROD: Is it documented. Is it embedded in your DDQ?
• Evidencing value for money – FCA consultation paper CP20/9
• Cashflow Tool: Do you use one? What are the assumptions within it?
• Retirement Fact Find: Updated date. Does it include soft facts?
• Annuity Rates: Checked rates. Update frequency?
• Safe Withdrawal Rate: Rate used. Consistency. Evidence?
• Cash Buffer: Yes or No? How held (on/off platform). How much?
• Risk Profiling: ATR. C4L. Need for Return. Risk tool Due Diligence?
• Inflation Assumptions: Rate used. Evidence?
• Taxation and allowances considerations: Income Tax and Lifetime Allowance, etc
• Sequence Risk: Understanding and explaining it. Mitigation Strategy?
• Investment Philosophy: Is it documented. Evidence?
• Investment Service: Pots or Single? Small Pots. Evidence/DDQ?
• Adviser Service Offer: PROD segments. Drawdown service?
• Adviser Fees: £s or %. Small pots. Long Term. Documentation?
• Platform for Drawdown: Checklist (PROD and Service). DDQ?
• Client Understanding: Process. Simplicity. Documentation?
• Vulnerable Clients: Statement. Process. Documentation?
• Conflicts: Issues. Management strategy?
• Showing Your Value: Examples. Communication?
• And last, but not least, is it aligned with your consumer duty requirements?

We Complement works with firms to build the CRPs, which should reflect a firm’s ethos, their desire to help, what is right for their clients and their investment beliefs, creating a document they can use as a guide each time.

A successful CRP is a living document, constantly updated to reflect a client’s changing desires and circumstances. Our aim is to support advisers in creating such documents while maintaining that regulatory consistency to keep everything in check and make sure the client is happy – which should be everyone’s goal.

If you would like to learn more about CRP, read the book that our founder Tony has written, which is full of useful information and insights.

We would love to help you to either revisit or implement your CRPs, contact us online or by calling 01472 728 030