Centralised Investment Propositions
Centralised investment propositions (CIPs) take various forms, including distributor-influenced funds, discretionary investment management (in-house or outsourced) and ‘portfolio advice services’, a term the FSA uses to encompass model portfolios all of which are easily manageable on the Novia platform.
In light of the recent Retail Distribution Review (RDR), many firms are changing their business model and choosing to offer a centralised investment proposition.
According to various sources over 60 per cent of the market is now in a model portfolio of some sort and a growing proportion are going into models managed by DFMs. Novia is the market leader in the number of DFMs offered – currently 42 firms - and the functionality to support the management of the portfolios are a core component of our proposition. Using a DFM via Novia has many tangible benefits, including:
- Novia pay the DFM directly and not through the adviser, this type of structure delivers benefits in terms of VAT payable and removes the adviser from administering this.
- DFM’s charges are remunerated transparently via the Cash Facility
- Access to DFM services are usually available at a much lower cost than a firm may get when going direct to the DFM
- In most cases we can remove the often prohibitive fund manager minimum investment levels that could stop clients accessing preferred funds.
- System benefits - streamlined bulk rebalancing and switching processes, automatically aligning all clients to the model concerned, thereby reducing risk to an adviser.
- Adviser Control – As Novia has custody of the assets the adviser can simply change the DFM if the one chosen fails to perform. This is completely at odds with a fund of fund solution where the adviser is stuck with the in-house manager, whatever the performance.
- Tools – we offer a comprehensive suite of tools to assist a DFM or adviser firm in dealing with model portfolios, such as; Model Portfolio Manager, Model Portfolio Evaluator, and Portfolio Performance Review.
More information on our DFM offering including a list of the DFMs we currently work with is available on our website on the Discretionary Managers page.
Preparing for the RDR
With less than 2 months until the RDR rules come into force on 31 December 2012 we're hearing more and more from advisers using other platforms about the pain they are going through in securing new client agreements and completing paperwork. We're pleased to say that for Advisers using Novia there is no impact on the existing Novia Adviser remuneration arrangements following the implementation on new commission payment restriction rules introduced as part of RDR. We have determined that when considering the substance of the arrangements adviser remuneration is not commission even though it is currently labelled as commission. This view has been validated by our external advisers.
The Novia proposition is commission free and has been since launch. The key to this assessment is the FSA definition for commission which refers to remuneration of any kind offered or given by the product provider which would be either paid by Novia or passed on by Novia from other product providers such as the fund managers.
Novia does not pay by itself or pass on any remuneration received from another product provider to an adviser in relation to advice given to their client.
Our arrangement for processing rebates is therefore fundamental in demonstrating that we comply with this statement. All rebates are received into our client money account and allocated to the customer’s account in full. Novia therefore does not receive and does not offer to pay to an adviser any amount of the rebate paid by other product providers. It may be helpful to contrast this with other business models where advisers are remunerated by being paid a proportion of rebates received from product providers as determined by the firm facilitating the adviser payment.
Advisers using Novia receive income for their advice through fees agreed by them with their customer and charged to the customer’s account.
The terms of business require advisers to agree remuneration with their customers and provide this information on the clients application form. The agreed remuneration is confirmed back to the customer in the account opening correspondence issued by Novia. The arrangements for remunerating the adviser are disclosed to consumers in the Terms and Conditions accepted by clients.
When looking at the substance of the remuneration for advisers this has always been customer agreed remuneration and not commission even though this has been labelled commission in our back office system and appeared online or in some reports or documents.
We are therefore satisfied that the guidance issued by the FSA PS 12/5 regarding the product providers obligations in handling the on-going payment of trail commission is not applicable to Novia. So, for users of Novia, the only change you will notice is the change of terminology with 'commission' being replaced with 'adviser charge'.
A lament that could look like an advert for Tesco but I would ask you all to bear with it……
It is widely known that Tesco established the Supermarket model we now have on a “pile it high and sell it cheap” basis. What is perhaps less widely known is that they had an internal motto of "YCDBSOYA" (You Can't Do Business Sitting On You’re a**e)
Tesco’s true success though over the last 90 years has been their ability to adapt to market demands and customer circumstances to stay ahead of their competition. The “pile it high” has now been replaced as customers seek increased value, increased diversity in the products they buy and the ability to shop wherever they want whenever they want.
In 2002 Tesco stunned the markets by buying 850 convenience shops in the UK. The scale of it allowed them to capture an immediate increase in market share, and as a result they really caught the rest of the industry out.
A little known fact though is the extent of Tesco’s innovative use of technology to improve their business. It was one of the first to build self-service tills and use cameras to reduce queues. It is also widely believed to be the only UK grocery retailer to make a profit from its internet shopping business.
It is this ability to diversify their business and use technology that has given Tesco the edge. I wonder what Tesco’s market share would be now without research into queues or internet shopping? Where would they be without the 850 convenience shops which we all use so often?
My lament is simple really. In Financial Services why do we not embrace technology in the same way as retailing and why is diversity so frowned upon? We are rightly proud of our technology and of the deal we have done with AEGON which enables us to further invest in it to improve our service.
Perhaps if our competitors spent less time frowning on diversity and more time thinking as Tesco do about the customer and not being wedded to the past the industry would move forward in much the same way as grocery shopping has.
Welcome to Novia Financial Blog
Welcome to the new Novia Blog!
For those of you who don’t know us, Novia is a leading independent fully integrated wrap platform, designed to assist financial advisers in managing their clients' wealth. We launched in late 2008 and have seen an excellent take up of the service with over 500 adviser firms signing terms of business with us.
I am the CEO here and before setting up Novia I was a founding member of Selestia, previous to that I worked briefly on the launch of Cofunds so you can see I have quite a passion for the wrap and platform market. This blog is intended to provide (hopefully) useful information for advisers and consumers interested in all things to do with investment and the platform world, especially in light of the new RDR regulations coming into effect. Some of you may have seen our comments in the press and will know that I am a passionate supporter of the “new model adviser” market; I am against the banning of cash rebates but support transparency, independence and Bath Rugby club.
The sort of topics that we are intending to “blog” about will include: the adviser market post RDR, our recent announcement with AEGON and what that means for our business, ISA’s and SIPPs, investment strategy, business efficiency and the benefits of technology and straight through processing. I do not intend to hog the blog – so some of our other Novia directors, Shaun Allwright, Richard Denning and Paul Boston will also be contributing. So that’s it for now, but please don’t hesitate to get in touch via 0845 680 8000 and watch this space for all our exciting developments at Novia.