building a robust and efficient review process - Finance & Technology ...

BUILDING A ROBUST AND EFFICIENT REVIEW PROCESS - March 2015

BUILDING A ROBUST AND EFFICIENT REVIEW PROCESS A LOOK AT THE DYNAMIC PLANNER APPROACH

Providing on-going reviews can be a time consuming process as advisers need to collate information on their clients’ investments, discuss any changes to circumstances and analyse the impact this may have on the investment strategies put in place. For a number of years advisers have looked to technology to help make this whole process more efficient by providing one point of data entry and for this data to be re-used across all tasks that need to be carried out. The FCA’s recent thematic review on the “Delivery of firms’ ongoing services” has made this even more important as expectations are that “if firms commit to providing an ongoing service to their clients, they need to ensure they deliver this in practice. Firms should also ensure they have appropriate systems and controls in place to ensure their ongoing services support the delivery of good client outcomes.” FCA— TR14/21

New features such as their risk profiler app, an overhaul of the MyPlanning client portal and increased number of WealthConnect partners all aim to enhance the current Dynamic Planner offering with the objective of reducing the cost to serve clients and ultimately the risk to the firm when advisers carry out client reviews. Within this document we have assessed the processes an adviser might go through when carrying out an ongoing client review using the new functionality and considered the benefits that these may bring in terms of time savings and reduced risk for the following processes. 

Obtaining a valuation



Creating a review report



Risk profiling the client



Recommending an investment strategy



Transacting the recommendation

We were recently shown some of the developments Distribution Technology have made in this area that are designed to automate many of the manual administrative tasks required when carrying out ongoing reviews.

YOU SHOULD BE AWARE This piece of work has been commissioned by Distribution Technology who have confirmed that the information is factually correct. All the information has been independently assessed by F&TRC. Distribution Technology have had no editorial control over the content. Any opinions presented in this document are F&TRC’s.

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The on-going review process has many steps from collating information on the client’s investments through to discussing these with the client along with any changes to their current circumstances, making a recommendation based on this and then transacting the recommendation. Throughout these steps there is a lot of information that needs to be recorded and documented to ensure that the adviser can evidence what has happened and demonstrate that they have acted in the client’s best interests. Completing these steps using a manual paper based process will mean that a lot of data will need to be re-keyed into the system that is being used to record the review, taking up valuable time and potentially leading to errors. Dynamic Planner has been designed to help advisers automate many of these processes by obtaining information electronically and re-using the data across all the steps that need to be taken. 1—Obtaining Valuations

Obtaining valuations for a client’s investments can be extremely time consuming if carried out manually as the adviser will need to either call the provider/platform or visit their extranet in order to obtain these. If the client has plans with multiple providers then the time taken is increased as the adviser is required to obtain the information from multiple sources especially when there are multiple different funds/investments held within each plan. Based on a plan having on average five funds, we estimate that would take approximately 15 minutes to contact the provider – either by phone or via the extranet—obtain details of the plan and record the value of each fund/ investment within a spreadsheet or word document. If we assume that on average a client has three plans each with different providers this could take up to 45 minutes in total. Dynamic Planner has integrations with most of the major life and platform providers—although some are still to be added—which allows the adviser to obtain valuations electronically within a matter of seconds. Entering the valuations link within the client record allows the adviser to view the last time the values were updated and enable them to update these for supported providers via a single click of a button. This will bring through not only the overall value but the values for each of the underlying funds and investments held within the plan. From login to obtaining the full valuations we estimate that this would take no more than two minutes to complete providing an estimated time saving of 43 minutes. Subsequent valuations can be automatically scheduled, removing the need for any manual intervention by the adviser and further increasing productivity savings. Task

Typical Time taken in manual process

Typical Time taken using Dynamic Planner

Typical Time saving

Obtain valuations (assumes 3 products and 5 minutes 45 minutes per plan for manual process)

2 minutes

43 minutes

Total

2 minutes

43 minutes

45 minutes

2—Creating a Review Report Once the valuations have been obtained, the next task for the adviser is to create a report which can be given to the client. Typically this type of report would contain the values of each plan, the real asset allocation—i.e. the combined asset allocation of all the underlying assets held within each fund in each plan—along with how this matches the risk profile of the client. Creating such a document manually would involve the adviser copying the valuation data they have already gained into a document, a process which we estimate would take approximately ten minutes per product. Ascertaining the real asset allocation would be far more complex as the adviser would need to obtain fund fact sheets for each of the funds to calculate how much is invested in each asset type as a proportion of the overall value. If a spreadsheet was used to do this we estimate this could take up to one hour if an average client had on average three plans each invested in ten funds. The adviser would then need to match this asset allocation to one of the Dynamic Planner

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risk profiles, increasing the scope for errors when transcribing information from different sources against a target asset allocation model such as Dynamic Planner's which uses specific asset classes.

When you are dealing with masses of information; automation and avoiding rekeying not only saves time but eliminates errors. Gareth Hope—Head of Development

Creating a review report within Dynamic Planner is far Towergate Financial easier as the document can be dynamically generated within the system. Entering the “Generate Reports” page within the “Servicing” tab gives the adviser the option to produce a number of different reports. If the valuation report is selected then the system will populate a report showing the value of the client’s investments and pensions along with the real asset allocation based on the underlying holdings. The whole process takes no more than one minute to complete and removes the need for manual calculations as the system does this for the adviser. Task



Typical Time saving

Copy valuations into the review report (assumes 3 plans and 10 minutes per product)

30 minutes

1 minute

29 minutes

Obtain fund fact sheet for each fund to retrieve the underlying asset allocation (assumes 10 funds per product and 1 minute per fund for manual process)

30 minutes

N/A

30 minutes

Calculate overall asset allocation based on the underlying asset allocation of each fund

1 hour

N/A

1 hour

Calculate the overall risk profile of the investments

10 minutes

N/A

10 minutes

Total

2 hours 10 minutes

1 minute

2 hours 9 minutes

3—Risk Profiling the Client Once the review report is completed the adviser will be ready for their review meeting with the client where they will discuss any changes in the client’s circumstances and the impacts this may have on their investments. Whilst most of the review meeting will be similar irrespective of whether the adviser uses a manual paper based process or not, the adviser will need to capture a lot of information and record this in order that they can demonstrate what was discussed and the actions decided upon.

Re-assessing the clients risk profile can become difficult if a manual paper based process is used, as they are unlikely to be able to calculate what the attitude to risk score is based on the responses given. Therefore the adviser would need to ask the client to complete the attitude to risk questionnaire, discuss their capacity for loss along with the different risk scores that could be achieved without coming to any firm conclusions. Once they are back at their desk they would be able to run the responses through their risk profiling tool to obtain the attitude to risk score and contact the client again to discuss the results before recommending an investment strategy. To help streamline this process and reduce the need for any re-keying of information, Distribution Technology have produced a Risk Profiler app, which provides much of the functionality available within Dynamic Planner. The app can be used both on and offline and therefore does not need an internet connection, which will help advisers when they are visiting clients outside of their offices.

As the app is able to sync directly with Dynamic Planner, all active clients are pulled through into the app removing the need to re-key any data. If the client is new and no records are available the adviser can add their details within the app which will create the client automatically within Dynamic Planner.

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Once a client is selected the adviser can start the risk profiling process by selecting whether they wish to use the 10 or 20 question attitude to risk questionnaire. The client is then able to go through and add their responses to the questions and once finished they will be shown the risk profile their responses correlate to. If the client has answered any questions inconsistently the app will also highlight these and invite the adviser to have a discussion with the client to ensure that they understood the question. This is an area the FCA have highlighted as a concern in many adviser risk profiling processes and the apps ability to bring this through automatically and record details of the discussions will help ensure a compliant process is maintained. The next step in the process is for the adviser to assess the client’s capacity for loss. In order to do this the app invites the client to complete three simple questions based on the expected term of the investment, the amount of money the client could afford to lose and still maintain their standard of living and whether they are likely to need access to any of the money. The responses to these questions will be played back to the client along with a brief explanation of how their responses might impact their ability to take risk. Based on the risk score attributed to the client’s attitude to risk and the responses to the capacity for loss the adviser is able to highlight the different risk profiles that may be suitable for the client giving them a detailed description of each level of risk, stochastic projections based on the 5th, 50th and 95th percentile returns over different periods and the associated asset allocation. Based on these the adviser can have a detailed discussion with the client about risk and volatility in order to decide upon the most suitable risk profile. This can then be recorded within the notes function to provide an audit trail of discussions and decisions made to protect the adviser. Now that the adviser and client have agreed the most suitable risk profile, the app gives the adviser the opportunity to either select the funds that the client will invest in or alternatively create the risk profiling report. If the adviser wants to select the funds they have the opportunity to choose from funds that have been matched to the risk profile selected for the client, or alternatively all funds. In both cases the funds can be viewed by risk level or by fund manager. Selecting a fund will give the adviser some information on the fund size, yield, charges and asset allocation after which the adviser can add the fund to the recommendation. Unfortunately at this stage the adviser is unable to select the proportion of the investment to be allocated to each fund—although the app can be configured by the adviser to reflect the firm's Centralised Investment Proposition—which we believe could save the adviser even more time when they return to the office. Selecting “generate risk profiling report” takes the adviser to an option screen where they can elect what information should be generated within the report. The adviser is able to include or exclude the attitude to risk and capacity for loss responses, the risk profile selection, the funds selected, notes and client declaration meaning that the report can be tailored to the client’s needs. Before the report is generated the app will ask for the client declaration which enables the client to sign on the screen electronically. This will provide confirmation that the client has understood the discussions and recommendations made and remove the need for sending a paper copy for the client to sign. The risk profiling report will then generate on screen—with the advisers logo if this has been uploaded into the app—and be populated back into Dynamic Planner. Unlike using a manual paper based process, the app enables the adviser to come to firm conclusions with regard to the client’s risk profile within a single meeting. It removes the need for further meetings to discuss the outputs which will often include travel saving both the adviser and client time as shown below.

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Task

Typical Time taken Typical Time taken Typical Time in manual process using Risk Profiler App saving

Complete attitude to risk questionnaire

10 minutes

10 minutes

N/A

Discuss capacity for loss

15 minutes

15 minutes

N/A

Record details of discussions

10 minutes

10 minutes

N/A

Re-key responses into risk profiling system to gain risk score 10 minutes

N/A

10 minutes

Re-key details of discussions into risk profiling system

N/A

15 minutes

Second meeting with client to discuss the output of the risk 1 hour

N/A

1 hour

Total

35 minutes

1 hour 25 minutes

15 minutes

2 hours

4—Transacting Recommendations Transacting any recommendation made in the review meeting can be a time consuming task if carried out manually. If a rebalance of funds is required the adviser is required to work out the proportion of each fund which needs to be sold and purchased which will often be carried out via a spreadsheet. We estimate that calculating the Dynamic Planner takes away the second buys and sells via this method would take approximately an guessing with regard to the calculating the real hour based on an average of ten funds, after which the asset allocation and brings consistency across adviser would need to enter the provider or platform advisers. extranet together with the details to instruct the Gareth Hope— Head of Development transactions. To complete the case the adviser would then Towergate Financial need to download the confirmation of the transactions and upload this into the system being used to record the advice. To transact a recommendation via Dynamic Planner the adviser needs to access the client records and set up a new case via the “servicing” menu. This will take the adviser through a simple wizard where they can select the plan they wish to make a recommendation on, import the details of their risk profile from the app, carry out analysis on the current and desired funds and input the new asset allocation via the recommendations tab. As long as the provider or platform is one of Distribution Technology’s WealthConnect Partners with fund switching capabilities the adviser will be able to select the “Apply Now” option. This will take the adviser through to the provider/ platform extranet where details of the fund switch/rebalance will be pre-populated. Whilst some WealthConnect partners will require the adviser to login others do not providing further time savings to the adviser. To complete the process the adviser is required to complete any information that cannot be pre-populated—such as confirmation that the information is correct—and then confirm the transaction. Details of the transactions will be pre-populated back into Dynamic Planner to complete the process. Task



Typical Time saving

Complete the recommendation wizard within Dynamic Planner

N/A

10 minutes

-10 minutes

Calculate the buys and sells to re-balance portfolio

1 hour

N/A

1 hour

Input details of buys and sells into provider extranet

10 minutes

N/A

10 minutes

Confirm the transactions

1 minute

1 minute

N/A

Download confirmation of transactions and upload this to advice system

2 minutes

N/A

2 minutes

Total

1 hour 13 minutes

11 minutes

1 hour 2 minutes

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5—Conclusions

Conducting on-going reviews can be complex and time consuming if carried out manually as the adviser needs to collate a lot of information from different sources, analyse it and based on their discussions with the client make and transact recommendations. The technology available to help advisers in this area has historically been disjointed with little information being re -used across the different processes, however Distribution Technology seem to have provided a solution that can provide an end to end solution by combining a client facing app incorporated full two way data exchange with a research solution that can transact recommendations on provider/platform extranets. Dynamic Planner presents a vast step forward in streamlining the on-going review process, however there are some improvements that could be made. The app itself only provides limited abilities to research and recommend funds, which if extended would allow the adviser to provide a full recommendation at the client meeting. Whilst the integrations with WealthConnect Partners are some of the slickest we have seen, they still require the adviser to leave Dynamic Planner to confirm the transactions that are being processed. Although no other integrations to our knowledge can currently do this, the nirvana would be for everything to be processed and transacted without the need to leave Dynamic Planner. Even without these tweaks Dynamic Planners ability to re-use data across an number of processes and different devices will undoubtably save advisers a vast amount of time. Each of Distribution Technologies WealthConnect Partners have differing levels of integration with Dynamic Planner and therefore the time savings may be different dependent on the platform being used. Below we have highlighted, based on our findings, the time savings that could be achieved throughout all of the processes we have highlighted in this document. The analysis highlights that Dynamic Planner could save advisers over five hours in each review, which is an 86% time saving. Task

Typical Time taken in manual Typical Time taken using process Dynamic Planner

Typical Time saving

Obtaining Valuations

45 minutes

2 minutes

43 minutes

Creating a Review Report

2 hours 10 minutes

1 minute

2 hours 9 minutes

Risk Profiling the client

2 hours

35 minutes

1 hour 25 minutes

Transacting Recommendations

1 hour 13 minutes

11 minutes

1 hour 2 minutes

Total

6 hours 8 minutes

49 minutes

5 hours 19 minutes

86% time saving from a manual process Over 700% Potential increase in productivity Put in other terms an adviser would be able to complete more than seven times as many reviews using Dynamic Planner as they would have when using a manual paper based process. This means that the costs of providing ongoing services to clients could be reduced and services could be provided to clients where costs were previously a barrier. The Risk Profiler app has clearly been built with the FCA’s “assessing suitability: assessing the risk a client is willing and able to take” paper in the forefront of the design and will provide firms with a robust and reusable solution to the complexities of risk profiling clients. Distribution Technology’s goal is to help adviser firms by reducing the cost to serve and risk to adviser firms and we firmly believe that Dynamic Planner and the Risk Profiler app does this by simplifying complex tasks, reducing the risk of errors and proving a robust and compliant process.

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TEST THE SAVINGS YOU COULD MAKE BASED ON YOUR OWN ESTIMATION OF TIMINGS Using our breakdown of the tasks involved in preparing for and carrying out a client review, find out how much time using Dynamic Planner could save you. Whilst there will undoubtably be other processes you go through we have highlighted below some of the tasks where Dynamic Planner could help save you time. Input how much time you believe each task takes you and compare this to how long we believe each task will take via Dynamic Planner. Typical Amount of time Typical Time taken using Your Time saving this would take you? Dynamic Planner

Task Obtaining Valuations Obtain valuations (assumes 3 products)

2 minutes

Creating a Review Report Copy valuations into the review report (assumes 3 plans)

1 minute

Obtain fund fact sheet for each fund to retrieve the underlying asset allocation (assumes 10 funds per product)

N/A

Calculate overall asset allocation based on the underlying asset allocation of each fund

N/A

Calculate the overall risk profile of the investments

N/A

Risk Profiling the Client Complete attitude to risk questionnaire Discuss capacity for loss Record details of discussions

10 minutes 15 minutes 10 minutes

Re-key attitude to risk and capacity for loss responses into risk profiling system to gain risk score

N/A

Re-Key details of discussions into risk profiling system Second meeting with client to discuss the output of the risk profiling system and decide on risk score Transacting the Recommendation Complete the recommendation wizard within Dynamic Planner

N/A N/A

10 minutes

Calculate the buys and sells to re-balance portfolio

N/A

Input details of buys and sells into provider extranet

N/A

Confirm the transactions

1 minute

Download confirmation of transactions and upload this to advice system

N/A

Total

49 minutes

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