Is an “Investment Proposition” Intellectual Property?

I am always keen to see how advisory firms differentiate themselves from the competition. I read recently in one of the industry publications of a firm that suggests that what separates it from other firms is that they have a investment committee that meets quarterly!

Most of us will agree that having an investment committee that meets regularly IS NOT really a differentiator but it got me thinking; is an investment proposition intellectual property that needs to be guarded and legally protected? Is it even a it a trade secret?

First, while we as professionals know how important and time-consuming the investment process is, it is not something clients really place a lot of value on. I don’t mean that it’s not important, just that clients don’t choose one adviser over the other because one of them has a ‘robust investment process’.

 According to the Intellectual Property Office, at the very basic level, an IP results from the expression of an idea. So IP might be a brand, an invention, a design, a song or another intellectual creation. It can be owned, bought and sold. But can a firm claim legal ownership of their investment proposition? Is it patentable? Is it proprietary?

For starter, the academic evidence underpinning most investment propositions are out there for anyone to use (and reference of course.) While each firm will differ in how they interpret, organise and apply these, it will be very hard for a firm to claim exclusivity and stop others using it.

Take a situation where an adviser has been in Firm A for several years, and  leaves to join firm B or set up their own firm C, what stops them from taking the ideas with them? Unless they copy the process word-for-word, how does firm A prove that the proposition is theirs? 

Take another instance where Firm X gives Firm Y the ‘license’ to use its investment proposition, for a fee. If we ignore all the culture issues, Firm Y may go down this route because they have neither the time nor the skills to run their own proposition in-house. But this may change over time and firm Y may decide to set up its own, what stops the firm in question from taking some or all what they have learnt from firm X, even where there is a NDA in place?

I am not an IP expert (just a guy who asks the questions) and I am an interested to know what you think! Is there anyone out their who has IP protection on their proposition or considering doing so? Is it a non-starter?

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8 thoughts on “Is an “Investment Proposition” Intellectual Property?

  • Might be different for a very clearly designed ‘product’ (although still v hard to protect) but I can’t see how you can protect a proposition as they are fairly generic. Stealing the written processes would be theft but there would be no problem if recreated again from scratch. You can’t stop people from walking away with the knowledge and experience gained in a role, which inevitably allows them to walk away and build something very similar. So I can’t see how you could protect it. Although I’m not convinced ‘propositions’ are as valuable as some make out anyway.

    Reply
  • INteresting concept, but according to https://www.gov.uk/intellectual-property-an-overview/patent :

    “Your invention has to be:

    new
    genuinely inventive (not just an obvious modification to something that already exists)
    something that can be physically made or used

    Things you can’t patent include:

    literary, dramatic, musical or artistic works
    schemes, rules or methods (including medical treatment methods)
    anything that’s solely an idea (eg a way of thinking, a scientific or mathematical discovery)
    new types of plants, seeds or animals”

    I’d guess that most of that means an investment process is excluded.

    I’d disagree that “Most of us will agree that having an investment committee that meets regularly IS NOT really a differentiator…” if only because most advisers don’t have one, let alone a written process. Present company excluded, of course, but out there in the big wide world? Sadly lacking I’m afraid.

    Reply
    • Thanks for your comment Frank. Re patent, I completely agree.

      While many firms don’t have a well documented process, clients rare know this and it probably won’t affect whether a client engages with the firm or not. I know it is incredible valuable from a regulatory and risk management point of view, but I’m look at a differentiator from a marketing perspective. So I am keen to know why you think it is.

      Reply
  • One must also consider the ownership issue of the IP. A business consultant delivers strong value in process or procedures taking into account interpreted legislation and best practice for being both effective and efficient. In building the ‘ideal model’ great thought is put into the integration of technology to a solution, cost analysis in time, capital expenditure, ongoing costs or licence fees etc. and this must be moulded perfectly to the individual business and existing resources.
    Whether an individual works as an employee (with restrictive covenants inc. IP) or self employed delivering the above to a business it’s hard to say a business has accrued exclusivity.
    Alas, business consultants do not get paid a singular one off fee in any industry that would negate the need for further work!

    Reply
  • Might be different for a very clearly designed ‘product’ (although still v hard to protect) but I can’t see how you can protect a proposition as they are fairly generic. Stealing the written processes would be theft but there would be no problem if recreated again from scratch. You can’t stop people from walking away with the knowledge and experience gained in a role, which inevitably allows them to walk away and build something very similar. So I can’t see how you could protect it. Although I’m not convinced ‘propositions’ are as valuable as some make out anyway.

    Reply
  • INteresting concept, but according to https://www.gov.uk/intellectual-property-an-overview/patent :

    “Your invention has to be:

    new
    genuinely inventive (not just an obvious modification to something that already exists)
    something that can be physically made or used

    Things you can’t patent include:

    literary, dramatic, musical or artistic works
    schemes, rules or methods (including medical treatment methods)
    anything that’s solely an idea (eg a way of thinking, a scientific or mathematical discovery)
    new types of plants, seeds or animals”

    I’d guess that most of that means an investment process is excluded.

    I’d disagree that “Most of us will agree that having an investment committee that meets regularly IS NOT really a differentiator…” if only because most advisers don’t have one, let alone a written process. Present company excluded, of course, but out there in the big wide world? Sadly lacking I’m afraid.

    Reply
    • Thanks for your comment Frank. Re patent, I completely agree.

      While many firms don’t have a well documented process, clients rare know this and it probably won’t affect whether a client engages with the firm or not. I know it is incredible valuable from a regulatory and risk management point of view, but I’m look at a differentiator from a marketing perspective. So I am keen to know why you think it is.

      Reply
  • One must also consider the ownership issue of the IP. A business consultant delivers strong value in process or procedures taking into account interpreted legislation and best practice for being both effective and efficient. In building the ‘ideal model’ great thought is put into the integration of technology to a solution, cost analysis in time, capital expenditure, ongoing costs or licence fees etc. and this must be moulded perfectly to the individual business and existing resources.
    Whether an individual works as an employee (with restrictive covenants inc. IP) or self employed delivering the above to a business it’s hard to say a business has accrued exclusivity.
    Alas, business consultants do not get paid a singular one off fee in any industry that would negate the need for further work!

    Reply

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