The difference between research and due diligence

Rant time!

I got really worried when ‘due diligence’ became the new buzz word.  It was about the time that Arch Cru was kicking off and everyone was being incredibly clever after the event.  Suddenly, every sentence included the phrase ‘due diligence’ even if it was talking about stationary supplies.

Don’t get me wrong, this is a good thing.  My rant is that more and more people are confusing research and due diligence and I’d really like to see a consistent understanding in the profession, so how is this for starters….

 

Research

Research is assessing how the characteristics and features of a product can be used to help a firm deliver it’s service proposition to a stated client segment.

Snappy enough?

The stage of approach should be that the client segments are defined and then the service delivered to each segment is designed.  At this point, research is conducted to find a short list of products that have the right characteristics and features to be used to deliver the service.

I am sure that in the new environment there are no longer companies deciding which products they like the look of and then building service propositions around those….

 

Due Diligence

Due Diligence is the analysis undertaken on the organisation delivering a product to consider its legitimacy as a commercial entity.

Am I on a roll now!

In other words, the due diligence is nothing to do with functionality or tax wrappers but rather how is the business built.  What does their business continuity plan look like?  How are senior executives remunerated?  What is staff turnover like?  What are their accounts like?

All of these will influence how well you can deliver your service and so your reputation is at as much risk as your clients investments, so doing good due diligence is essential, just don’t put the cart before the horse.

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6 thoughts on “The difference between research and due diligence

  • Yes. This. When we do what I call provider selection on platforms or CIPs for advisers, everyone else, including those advisers, calls it due diligence. It’s not, as you so rightly say.

    Do we untangle the mass of SPVs and legal entities that constitute most lifecos to give an uncluttered view of their commercials for a guy looking for a new platform? Hell no.

    Of late I’ve sort of given up and just started calling it DD as well. This gives me a kick and will stop me backsliding – thanks Damian.

    Reply
  • Yes. This. When we do what I call provider selection on platforms or CIPs for advisers, everyone else, including those advisers, calls it due diligence. It’s not, as you so rightly say.

    Do we untangle the mass of SPVs and legal entities that constitute most lifecos to give an uncluttered view of their commercials for a guy looking for a new platform? Hell no.

    Of late I’ve sort of given up and just started calling it DD as well. This gives me a kick and will stop me backsliding – thanks Damian.

    Reply

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