In the world of financial advice, there’s much love in the air for Centralised Retirement Propositions, or CRPs.
That’s because, in the shifting landscape of pension freedoms, they take the Centralised Investment Propositions (CIPs) that have been so effective for accumulation, and adapt them for decumulation too. That’s maybe why in our recent survey of 300 advisers, almost 6 out of 10 said they wanted a CRP in the same way that they have a CIP.
But initial attraction isn’t turning into true love. Many CRPs are worryingly inflexible, and may not meet the needs of advisers or clients.
Will the money last?
When managing people’s retirement pots, one issue is always centre-stage: how to make that pot last for a lifetime, when we don’t even know how long that lifetime will be.
But the design and inflexibility of many CRPs makes it harder to manage the numbers to meet the goals. They lack back-testing during all market cycles, for instance, and may leave clients vulnerable to sequence risk and risk of ruin.
Costs have to be fair
Next, there’s the issue of costs.
CRPs have clear benefits for advisers – for example, they help you meet your MiFID II and PROD responsibilities around disclosure and client suitability, without requiring you to commit huge resources.
But that’s not really enough if they don’t come at a cost that you or your clients are prepared to pay. In a decumulation environment where clients’ savings are running down over time and disclosure is throwing charges into sharper relief, scrutiny of costs is going to be intense.
CRPs don’t have to be cheaper than other routes, but they do have to be demonstrably fair.
Admin needs to be easy
There’s a similar story with administration. Responsiveness, flexibility and client experience are crucial, and advisers need a CRP that works at scale for every client.
With many CRPs, set-up and maintenance just take too long.
How to do better
With so many CRPs failing to meet the needs of advisers, we knew that something better was needed. So, we designed it and called it the 7IM Retirement Income Service (RIS).
We’ve built it to reflect real life – where circumstances change and flexibility is crucial – but without adding complexity or cost. It’s scalable and easy to use, yet immensely sophisticated behind the scenes. And it’s based on comprehensive modelling and research.
Here’s just one example of that. To meet clients’ needs for income requires a continual rebalancing to a target asset allocation in a portfolio. The norm for CRPs is to do this within a specific tax wrapper (i.e., their SIPP or ISA).
But our RIS is smarter than that. It rebalances across the overall portfolio and multiple tax wrappers, so your clients are in the right place, at the right time, across all their holdings. You won’t find this anywhere else.
This post was created for the DISCUS website by George Winters at 7IM (Seven Investment Management). You can find out more about their investment services here ›