The responsibility lies with the discretionary firm to manage risk effectively by utilising software as a tool to agree the risk the client is willing and able to take. There are various software solutions in the market which allow for this process to be recorded in detail, and implemented effectively.
Analyse and prepare solution: A robust CIP and CRP, backed up with the analysis provided through sound software and potentially also third-party research, will achieve greater efficiencies throughout the discretionary advice process.
Discretionary managers must consider the additional reporting duties required by the regulator, and supporting software solutions can build added efficiencies in this arena:
- Quarterly valuations
- Portfolio reporting – charges and cash summary statements
- Transaction reporting
- Costs and charges
- Consolidated tax vouchers
Recommendations and agreement: DIM firms should utilise software that enables the manager to efficiently analyse investment solutions from many sources.
From this research and analysis, a thoroughly documented client recommendation can be formulated. The role of technology at this stage allows for the manager to record their decision-making process in detail and be able to explain it to a client for agreement.
Implement recommendations: Technological advancement are such that firms can now make an application electronically, and even push this recommendation on to a CRM system for onward transmission to a platform.
Although sometimes difficult to establish the links, once implemented it makes for a faster and more efficient process.
Review: The implementation of the above-mentioned technology results in a smoother, faster and better annual review process.
The proper implementation of software will result in a more efficient business; however, it is also important to determine the capabilities of any other organisations you work with.
As with any due diligence process (within the CIP for example), firms must take the time to understand how their investment and platform partners use software.
This could include how they report, as in the case of DFMs, questioning if they make use of API and whether their systems talk to the firms CRM.
Other technological requirements
So far, we have looked at the technology requirements around CIPs. This is important because it is from this that any DIM firm’s service proposition emanates. However, due to the added complexities of the discretionary service, there are other important technological requirements to consider.
The added regulatory requirements of DIMs places the onus on back-office software to be able to provide the correct information speedily and efficiently in order to prepare returns to the FCA.
