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So, what makes a good CIRP? You might have your own take on what a CIRP should look like, but essentially what you are looking to do is incorporate a retirement framework into the CIP.

You’ll already be familiar with some of these concepts as the FCA – then the FSA - talked CIPs in FG12-16, which was released in 2012. Most of the ideas I’m going to discuss in this article are nothing new, I’m just outlining some enhancements based on feedback from the recent Retirement Thematic Review TR24/1.

I’ve received the question ‘Do I need a retirement proposition as well as an investment proposition?’ many times, even before the recent thematic review. My answer has consistently been that your investment proposition should always include an accumulation strategy which outlines a client’s typical investment journey up to the point of retirement, and a decumulation strategy which outlines a client’s typical retirement journey, addressing key questions around how a client can access income.

It is important to consider how you will assess the attitude to risk and capacity for loss for both accumulation and decumulation clients; this was outlined in FG11-5 as far back as 2011. It is also important to have tools in place that help measure decumulation risk for clients, looking at points such as sequencing risk and analysing a client’s capacity for loss across various scenarios. The client’s appetite for risk may change in the decumulation phase, so it is important firms revisit this at the point of giving at-retirement advice, and that the risk profiling process is appropriately adapted, so it works for both accumulation and decumulation scenarios.

Research and due diligence should be carried out on back-office systems, risk profiling, and research tools, both because firms need to be comfortable with why they have chosen the system, and so they can demonstrate why this fulfils the requirements of the business with an ongoing review of suitability. The CIRP should have this documented, in order to illustrate how they meet the needs of the client.

A good CIRP should outline the firm’s process when it comes to cashflow planning, as this is a key part of the decumulation phase of the client’s journey. Firms should have processes in place to demonstrate a client’s cash flow planning scenario. Most firms will use a third-party system for cash flow planning, whilst others will use an in-house system or process. It is very important to document and demonstrate why the process that is selected is appropriate for the clients with which the firm works. Various cash flow planning scenarios should also be stress tested, and all staff using these systems should have sufficient knowledge on the process and be able to present it to clients with a clear link to their goals.

Product Intervention and Product Governance Sourcebook (PROD), which has been around since 2018 and has been brought into focus again as a result of Consumer Duty, aims to ensure solutions meet the needs of the target market, are distributed appropriately, and deliver good client outcomes. If built correctly, PROD creates a clear strategy within the CIRP, as it segments your client bank based on circumstance and experience level. You can also look at segmenting clients based on their typical investment objectives and where they are in the investment lifecycle. What you are not aiming to do with PROD is segment clients solely based on AUM, or how much the client is worth to the business.

The next part of PROD within the CIRP is to outline relevant financial instruments (RFI). An easy way to explain an RFI is to think about everything into which an adviser can invest a client’s money. Within your CIRP, you will need to outline which financial instruments you are going to include and exclude and match the RFI to the relevant client’s segments.

Once you know which RFI you are going to use within your CIRP, you will need to research the whole of market to find the best solutions that meet the needs of the clients. It will be much easier to incorporate a research system that will help you filter the whole of market to a manageable shortlist. You will then need to speak to the manufacturer to ensure you have carried out adequate research and due diligence on the product/investment and any platform on which it might sit. Once you have done that, you will be left with a handful of solutions which meet the needs of clients in the accumulation phase, and specific solutions for clients in the decumulation stage to help deliver the clients income needs in retirement.

This all should be documented centrally and should be reviewed on an ongoing basis.

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