The assets outside your proposition are still part of the advice

A centralised investment proposition describes what a firm recommends. It is usually silent on what a client already owns, and that silence is where a lot of suitability risk now lives.

The picture in a typical new client case is rarely confined to things an adviser chose. There is a workplace pension sitting in a default fund nobody has looked at. Often a self-directed account with a handful of individual holdings bought on conviction. Sometimes a legacy employer shareholding that represents an uncomfortable share of the household's wealth. Increasingly there is a small crypto position, bought some years ago, that the client mentions almost apologetically.

None of that is in the proposition. All of it affects whether the recommended portfolio is right.

Two different questions, often merged

The first question is whether to advise on an asset. The second is whether to account for it. Firms sometimes decline the first and accidentally decline the second with it.

Declining to advise on a self-directed holding is a perfectly defensible position, and for some assets it is the only sensible one. But the client's overall exposure is not a matter of opinion. If a household holds a large single-stock position outside your advice, the risk the recommended portfolio should carry is different from what it would be if they did not. Recording that you were aware of the holding and explaining how it shaped your recommendation is not advising on it. It is advising properly on everything else.

Where this bites in practice

Concentration is the obvious one. A client whose employer shares make up a quarter of their liquid wealth has a risk profile that no questionnaire captures, and putting them in the same model as a client with identical answers and no such holding is the kind of thing a reviewer notices.

Correlation is the quieter one. A client with a crypto position and a growth-tilted portfolio may have more of the same directional exposure than either of you intended, not because the assets are similar but because both tend to be sensitive to the same conditions. Nobody chose that. It assembled itself from two decisions made separately.

Then there is the default fund problem. A workplace scheme left in its default is often the single largest pot in the household, and it is frequently the only part of the picture nobody is reviewing. If the firm's proposition governs a third of the client's wealth and the default governs half, describing the proposition as the client's investment strategy is not accurate.

What to change in the proposition

The proposition itself does not need to expand to cover assets you do not manage. It needs a stated position on them.

Something close to this works: these are the asset types we advise on, this is what we do when a client holds something outside that, and this is what we record. The second clause is the one most propositions lack, and it is the one that makes the file defensible.

The practical version is a line in the fact-find that captures held-away assets with enough detail to assess concentration, and a line in the suitability letter that says how they were taken into account. Neither requires you to recommend anything you would rather not.

A proposition that only describes what you chose is describing half the portfolio.