Bringing Greater Efficiency to Restricted Advice Practices
Lately, at PowerPlanner, we've been introduced to the working practices of a well-known restricted advice network in the UK with a view to using our in-house technology to offer paraplanning services to one of their ARs.
Adapting our systems to align with their working practices has been an interesting experience, and I figured it'd be worth writing about our findings in case it offers any ideas to others also looking to improve efficiency in their financial advice processes.
Deterministic Decision Making
One of the most palpable things that sets restricted market advisers apart from independent financial advisers is the way in which investment decisions are made. Restricted practices take the market research requirement away from their appointed representatives and instead offer a discrete set of investment options suitable for their clients' needs.
Choosing a specific investment solution from this discrete set is a function of several client attributes (attitude to risk, passive/active management, ESG preferences etc.) that, when combined, point to a pre-approved choice for the adviser's client.
In this case, the set of investment options has been recorded as a lookup table in a PDF document, which gets circulated to all advisers in the network. While this document is very readable and easy to follow through to an investment solution, it has a few notable drawbacks:
- Whenever changes are made to the set of approved solutions, a new version of the PDF document has to be circulated. This isn't much of a problem in itself, but when there are lots of versions around it can get confusing as to which is the latest/correct version to be using, and some advisers will inevitably end up using out-of-date versions and recommending the wrong products.
- There is no way of telling how the lookup table has been used to arrive at a decision. An adviser can select any solution from the PDF and there's no record of the logic followed to discern the investment solution.
- The number of parameters that can feed into the decision making process is limited. Any lookup table written into a flat document is realistically only ever going to be, at best, three dimensional. Once you get towards 4, 5 or more attributes that need to be considered it becomes very difficult to express the lookup table in a legible, graphical format.
Making it Work Better
This kind of selection function is really the sort of thing that software should be doing for you. You can feed in the client's attributes/preferences as inputs, allowing the algorithm to take care of the decision logic and produce an output showing the result. It could also output the attributes and the decisions made so that you have an audit trail, and then the result could be saved and kept on the client's file. None of this is possible by passing round a PDF.
Also, when the research team decide the set of approved investment solutions needs updating, all you need to do is update the software centrally, and the ARs will all be rolled over onto the new version immediately. Note that the extent of this benefit depends on the software architecture you use, so we'd always favour an online web application in situations like this for this reason.
Reports
The same theory is true for suitability reports. Indeed, as these are inherently more complex than just deciding on an investment strategy, there is even more benefit to having a systematic approach to suitability report production.
The restricted practice with which we've been working have a system of templates for this. There is a set of MS Word documents containing coloured text to denote default wording, instructions for paraplanners and conditional content. A template is provided for each type of advice being given (e.g., pension transfers, IHT planning) and appointed representatives are required to use these templates when writing their suitability reports.
However, like the aforementioned PDF lookup table of investment solutions, the decentralised Word templates exhibit the same shortcomings around version control. There are also the following significant risks to prescribing SR content in this way:
- The report templates contain no automatic data validation. It's not feasible to embed meaningful data validation into MS Word documents, so it's all down to the report writer to get the facts and figures correct and in the right places.
- It is a fully manual process to turn a template into a compliant report. The report writer is responsible for interpreting the coloured text in the report templates and following the decision logic manually. This is prone to error and it's very easy to delete too much or make another mistake that would lead to a compliance issue.
- Report templates are not all-encompassing. While it's helpful to have defined wording for common recommendations, when you get a holistic financial planning case it's down to the report writer to pick the appropriate sections from the various templates. This is very difficult to get right, as it's not just about copying and pasting blocks of text, but the risk warnings, product features, relative advantages/disadvantages etc. all need to be articulated in the report too. Even the most experienced paraplanners struggle to get right all the time.
Further to the last point, when going through the firm's Word documents, we actually found very little consistency between the templates of different products, so even agreeing the general sections (e.g., Client's Current Circumstances) for this particular firm was not a straightforward task.
Considering the above, it's clear to see how time consuming and error prone it is to produce a quality suitability report using manual cut/copy/paste methods and navigating coloured text. I know many paraplanners out there are having to deal with this day-in, day-out, but we are building a better solution.
The Solution
Our strength at PowerPlanner is our in-house technology and, in particular, the fact that we have complete control over it and can adapt it to suit our needs.
The software we use for existing plan analysis feeds into our suitability report generator, which computes an abstract report structure based on the "shape" of the financial planning case. This abstract report is then merged with our templates to add the textual and graphical content, before a style sheet is added to apply the adviser firm's branding to the suitability report.
Having this separation between the abstract structure of the document and its textual content means that we can customise the wording without affecting the algorithms that drive the report generation. We have thus been able to take the MS Word templates provided by the restricted advice network and translate the coloured text into decision logic understood by our software. As such, our system is being adapted to produce suitability reports based on the network's requirements, meaning that the report writer is relieved of any manual, laborious and error-prone duties.
In Conclusion
We're only in the early stages of working with this firm, but it's exciting to see how adaptable our technology is and how well we can accommodate their requirements. There is great potential for their ARs to benefit from PowerPlanner's efficiency gains without having to rewrite their report templates or change their preferred ways of working.