Much Ado About Nothing? 

Here, in ValidPath World, we've always had a core focus on emphasising, retaining and incrementally improving those things which matter, and avoiding the kinds of novelty which get us all temporarily hot under the collar, but ultimately prove to be both fruitless, distracting and expensive.  For those with long memories, Y2K is one example of the kind of thing I have in mind.  Another would probably be MiFID II.  In our opinion, change for change's sake is Bard...

Now I've got my daily dose of terrible puns out of the way, I wanted to focus more seriously upon the focus we have had on improving the functionality of the due diligence system that's available to our Members, the one that is sufficiently robust to give real substance to the term Independent Financial Advice.  We adopted DeFaqto Engage across the Network in 2013, and in the subsequent years have consistently emphasised the real value of genuinely independent advice which is underpinned by this kind of verifiable due diligence (DD).  It has always been a good system, fit for purpose for those who take independent advice seriously.  And there have always been Advisers who prefer to do things differently.

When DeFaqto announced the availability of 'Engage Core', their improved, goals-driven DD system, we were enthusiastic about the idea, having been equally enthusiastic participants in a short-lived 2007 FSA initiative, called 'Quality of Advice Outcomes'.  That was suffocated by the deluge of EU regulations, but it was one of those rare moments of regulatory clarity which might possibly have delivered vastly improved outcomes for customers.  We've spent six months testing Core, and establishing that it is, in fact, a significant step forwards in terms of objectively mapping our due diligence onto specific client objectives - and made the decision to upgrade.  Most of the ValidPath community have now been moved onto Core, and the last few weeks have seen some necessary initial training, in order to bring people up to speed, as the process of operation is quite different, starting as it does with the client's objectives.

Like many Advisers within ValidPath, I am still on the learning curve of the new 'Core' system, but I am excited by what I am discovering, in terms of the way it enables me to do my job.  I was attempting to determine what it was I liked about it, and came up with the following graphic:

DeFaqto002

There are a number of really significant benefits here:

  • This is not due-diligence 'by computer', without the need for professional intervention and human interaction - Core is the research equivalent of a Stradivarius violin which, in the right hands, can produce exceptional quality work;
  • As you follow each key step in the DD process (agreeing the appetite for risk, establishing the investment proposition etc), Core invites the user to add that documented component to the suitability audit-trail - which means that everything is joined up, nothing is ever lost or omitted from the key considerations.  
  • There are key stages in Core's DD methodology where the Adviser can test out the results of his or her work, in order to determine that the likely outcomes will be within acceptable parameters.  I've indicated these points with the pink icon in the diagram, as I think that this approach is hugely beneficial, and certainly a big improvement on practicing optimism in front of the bathroom mirror.
Having 'good systems' isn't about having a piece of software available to you, or about having access to a particularly neat website.  They are about gluing essential components or stages into a robust, logical order, so that the outcomes generated are reliable and verifiable.  That is precisely what Core achieves.  It does not replace the professional IFA, and neither may it be regarded as somehow surplus to requirements - it provides a framework of enablement, allowing us to replicate our work for new clients in an efficient manner.

And it has more functionality than you can shake a spear at...
 

For ValidPath Members...

Take a look at our 2019 guidance on Due Diligence - we have recently added some new material which we hope will be helpful.


 
Kevin Moss, 12/04/2019