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Business efficiencies and tailoring client outcomes fuel demand for Centralised Retirement Propositions

The popularity of Centralised Retirement Propositions (CRP) continues with a 15% increase among financial advice firms since 2020. New research from M&G Wealth, conducted by NextWealth among 200 adviser firms, cites greater business efficiency, optimal client management and meeting regulatory requirements as the key contributors to this growth. 

2022 2021 2020
CRP in place in the firm 55% 50% 48%
Intent to introduce within the next 12 months 23% 20% 23%
No plans to introduce 22% 31% 28%

 

Pointing to a return to pre pandemic popularity, the research found over half of those firms surveyed (55%) already had a CRP in place and nearly a quarter (23%), stated they intended to introduce one within the next 12 months.

The third iteration of the study comes at what continues to be an uncertain and challenging time for advisers and their clients. External and economic factors, and regulatory changes such as the FCA’s plans for new Consumer Duty rules, continues to alter retirement advice and planning. The research aims to highlight the growing importance of CRPs and how advisers and their clients can benefit.

The research also found that close to a fifth (22%) of respondents do not have plans to introduce a CRP. Of this, almost nine in ten (89%), said this was because advice is tailored for each client individually, just one in 20 (4%) stated their business model makes it difficult to adopt a single advice process across their advisers as the reason for not having a CRP.

Driving business efficiency is the most popular reason for having a CRP, according to almost a third (31%) of advisers surveyed, with the benefit to the client and meeting mandatory regulatory requirements (both 18%) the second most popular. Other benefits mentioned include business process improvement (16%), risk reduction (14%) and client service design (2%)

Heather Hopkins, Managing Director of NextWealth, comments: “While a CRP provides a set of guidelines, individual clients may need different products or approaches. Advisers told us one common reason to work outside the CRP is to meet specific ESG investing requirements. Flexibility is important in respecting the knowledge and professionalism of advisers and the strong relationship they have with clients.”

Justin Blower, Director at M&G Wealth said: “Over the last three years, we have tracked use of and plans to introduce a CRP. We’ve seen steady progress over this time, with growing numbers of adopters, with one notable exception in 2021. As we emerge from the pandemic, we have seen a recovery in the number of businesses adopting a CRP, with only a small share of advisers having no plans to introduce a CRP.

“It’s an uncertain and challenging time for retirees and their advisers – an intensity that hasn’t been experienced for 30 years. Widespread geo-political tension, ensuing market volatility, and the spectre of double-digit inflation have made expert retirement advice more valuable than ever. But the task facing advisers can equally feel more daunting. Against this backdrop our study feels especially relevant.

“There are two factors contributing to the renewed rise in adoption of CRPs. First, the pandemic stalled adoption of new processes as firms focussed on shifting working practices and technology adoption to support remote working. Second, we know that larger firms are more likely to adopt a CRP and we have seen a steady shift in the make-up of financial advice businesses as large firms buy smaller ones.

“Financial advice businesses have faced mounting PI costs and are under intense pressure to document processes and reasons for client recommendations. To make the business of financial advice more efficient, having agreed parameters and processes within which to operate is important. A CRP helps firms deliver consistent advice to clients, define the withdrawal strategy and the process for arriving at the recommendation. It is not meant to constrain advisers, and so we are pleased to see that benefit to the client continues to be recognised by advisers as among the top benefits of adopting a CRP.”

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