Breaking Bottlenecks to Scalability - Client Profiling

23rd July 2021 Adam George

Back in February, we shared our top tips for breaking bottlenecks in your administrative capabilities. This follow up post about scalability focusses on your client profiling, and how to efficiently develop paraplanning solutions that serve a wide variety of clients' needs.

The Regulator's View

Contrary to the belief of some, the FCA are not against using sensible financial profiling techniques to deliver advice to individual clients.

The trusty Conduct of Business Sourcebook sets out an explicit requirement to obtain sufficient information about the customer including his/her financial knowledge and experience, and requires that a firm must use this information to act honestly, fairly and professionally in accordance with the best interests of its customer (the "client’s best interests" rule). Essentially, if you can demonstrate that you understand your client and you can construct a suitable portfolio to meet his/her needs then you're meeting the FCA's requirements.

Putting it into Practice

Of course, every one of every financial adviser's clients is unique, but that doesn't mean we don't come across similarities, and IFAs shouldn't be afraid of treating similar clients in a similar way.

After all, if you have two clients of a similar age, with similar earnings, the same SRA and the same attitude to risk, it's entirely reasonable that these clients are recommended the exact same thing (for the same price too, importantly). Indeed, not doing so could be viewed as going against the TCF (treating customers fairly) principle.

On the other hand, you obviously can't just put everyone in the same MPS on the same platform irrespective of their situation. As with many things in this industry, there's a sweet spot when it comes to finding the right solutions for your clients.

At PowerPlanner, we believe the sweet spot looks a bit like this:

1. Define What You Offer and What You Don't

Even the "wholiest" of whole of market advisers aren't expected to offer literally any product from any provider. Most do regular reviews of the market and choose a subset of financial platforms and products to recommend to their clients based on their research.

Clearly defining the subset of financial arrangements you're happy to recommend is a great place to start profiling. For example, are you offering comprehensive financial advice including mortgages, IHT planning, defined benefit scheme reviews etc. or are you just delivering DC pensions, protections and investments?

It may sound obvious, but having this kind of thing clearly defined means you can quickly see which clients you'll be able to help and which you won't. This can save a lot of time that would otherwise be wasted working on a case that it isn't possible to progress.

2. Define Reasons for Recommending Particular Products & Services

The next step is to work out what differentiates each product and the exact reasons why you'd recommend one over another. You only need a few points of differentiation for each.

For example, you may have a super cheap, online-only platform available at a great price, but for those less confident with online-only solutions this may be deemed inappropriate. As long as you raise the topic of modern technology in your client meetings you'll be able to elicit the knowledge needed to select or disregard this platform, leaving a smaller subset of possible financial solutions for your client.

This is not only efficient, but it's a clear demonstration of you considering the "softer" facts as part of your process. After all, client profiling shouldn't mean dehumanising.

3. Link the Decisions Together

At this point you'll have identified some approved financial solutions and defined the decisions that would be taken in deciding to recommend them. By chaining several decisions like this, you can produce a logical path to a financial planning solution that meets your clients' specific needs.

It's worth mapping this decision path out as a high-level diagram to see clearly what aspects your profiling process has covered. This will typically take the form of a flow chart or a matrix of some kind, maybe even a combination of the two if it makes sense. You might even have several separate charts to explore sub-options, such as ESG solutions for those who wish to consider this aspect of investment particularly purposefully.

Again, having this process clearly defined gives you the added benefit of being able to prove to the regulator that you are objectively considering these aspects of financial planning for all your clients.

4. Try with Some of Your Existing Clients

It can be a really useful exercise to run a few of your existing, well-known clients through the profiling process. Using established clients means you'll have the information at hand to run through the logical path and see what solutions they're deemed suitable for.

If the path leads you to the financial solutions they're already in, that's affirmation that your decision logic is sound and in line with your advice process. If not, then it should be easy to see as you step through where the logic in the profiling process needs tweaking or, alternatively, maybe it suggests there's a better solution for that client to discuss at the next review meeting.

As you iteratively repeat this for a few clients or test cases, you'll be able to refine your decision making process to ultimately arrive at an optimal solution.

A Word About Risk Profiling

There are many, many well-established tools for ascertaining a client's attitude to investment risk. This is, of course, a crucial part of the financial planning process, and one for which questionnaire-driven profiling is already an accepted part of life for financial advisers.

Risk appetite should be a factor in deciding appropriate financial arrangements too. A risk-averse client, for example, would probably be deemed unsuitable for an EIS when considering tax-relief solutions, and these kinds of decisions need to be built into the wider client profiling strategy. As such, it's recommended that risk profiling is completed in advance of going through the financial decision making process described above.


Defining the services you offer as an IFA and enumerating how they help your clients can be a powerful basis from which to make compliant, consistent paraplanning choices.

Even if you don't use this technique for all your new clients, it can still be a useful exercise to do in your regular due diligence reviews to ensure your approved financial solutions are still sufficient to meet your clients' needs and objectives.

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