Most firms have a centralised investment proposition by accident

Ask an adviser what their firm's centralised investment proposition is and you will usually get an accurate description of what the firm does. Three or four risk-rated portfolios, a platform, a review cycle, a provider whose models they trust. That is a description of practice.

A proposition is a different thing. It is the reasoning that produced the practice, written down well enough that someone else could apply it and reach the same answers. Most firms have the practice. Fewer have the reasoning.

This is not a criticism of how firms got here. A CIP in a small firm usually grows out of one person's judgement, exercised well, over a long period. The founder had a view about cost, or about active management, or about keeping things simple enough to explain. That view shaped the portfolios, and the portfolios shaped the defaults, and the defaults got applied by advisers who joined later and inherited the conclusion without the argument.

Why the distinction shows up under pressure

An inherited proposition and a designed one look the same in a client file right up to the point where something unusual happens.

A client arrives whose circumstances sit awkwardly across two of the models. A new adviser joins and wants to use something different for a case they know well. A provider changes a mandate. The platform puts up its charges. In a firm with a designed proposition, each of those has a place to be considered: the stated objectives of the proposition, the criteria for inclusion, the review that already exists. In a firm with an inherited one, each becomes an argument about preference, usually settled by whoever has been there longest.

The regulatory version of this pressure is a question about shoehorning, and the uncomfortable thing is that a firm with good portfolios and no written reasoning cannot distinguish itself from a firm that simply puts everyone in the same place. Both files show clients clustered in the middle models. One has an explanation available and the other does not.

The test

Here is the question I would put to your own firm. If your most experienced adviser left tomorrow, could the rest of the firm explain why the proposition is built the way it is, and apply it to a case nobody has seen before?

If the answer depends on asking that person, the reasoning is in their head. That is not a governance failure in any dramatic sense. It is a single point of failure sitting inside the most important thing the firm does.

The second question is narrower and more revealing. When did the proposition last change, and what caused the change? A proposition that has not moved in five years is either unusually well designed or has never actually been reviewed, and the review paperwork will not tell you which. A proposition that changed because a provider was dropped on evidence, or because a segment of clients was found to be poorly served, has a working review behind it.

What a week of work looks like

Writing a proposition down from scratch is a project. Establishing whether you have one is not.

Take the portfolios you actually use and, for each, write two sentences: who this is for, and why it is built this way rather than another way. Then take the three clients who least obviously fit and see whether those sentences cover them. Where they do not, you have found either a gap in the proposition or a client in the wrong place, and both are worth knowing.

The firms that come out of this exercise best are rarely the ones with the most sophisticated portfolios. They are the ones where somebody, at some point, wrote down why.