De Minimis framework for financial planning firms
De minimis withdrawals – less work, same outcome
In many firms, when a client in drawdown requests an extra withdrawal, no matter how small, the adviser creates a new cashflow forecast and runs a full advice process.
It’s thorough and safe. Belt and braces.
However, it’s also incredibly time-consuming.
Clients wait longer than they expect for their money. Advisers use capacity on non-fee generating work, and everyone gets frustrated. At Melo, we see this all the time.
The challenge is how to keep the necessary systems and controls without creating unnecessary drag.
If the withdrawal will make a difference to the client’s plan, this full process is exactly the right course of action.
If, however, the withdrawal makes no material difference to the client’s long-term plan, creating a De Minimis Framework could save hours of financial planner , paraplanning and compliance time, and still produce the same end result. Here’s how.
The De Minimis Framework
We facilitated a discussion between a director, a paraplanner and the compliance manager to tackle the problem using a De Minimis Framework. This works well for small, ad hoc withdrawals, structured in a way that makes life better for everyone.
- It satisfies the regulatory requirements.
- Creates less work for the financial planner and firm.
- Client gets their money faster.
Win, win, win.
How does it work?
Firstly, the firm needs to create a policy based on what they’re comfortable with as boundaries for the de minimis level. For example, withdrawals up to £5,000 or 1% of the overall portfolio. The policy should also include what situations the de minimis can be used and the situations where it’s not appropriate.
The firm should document this and keep it on file, alongside the any checklists and the template report, to go with the staff training.
Next, the financial planner and client need to agree the de minimis level they are comfortable with (inside the boundaries set by the firm) based on the client’s capacity for loss.
Once agreed with the client, the de minimis should be reviewed and reconfirmed annually. Each withdrawal request is then reviewed against the de minimis criteria.
It’s important to keep firm level data on the number of cases where the de minimis was used and where it wasn’t. Tracking this data can help you spot trends in under/over use and see how planners apply the framework.
Key things to include in the template report:
- The agreed de minimis limit with the client.
- Any tax implications from the withdrawal.
- Confirmation the client’s circumstances and risk profile remain unchanged.
- Sign-off from both client and adviser.
When backed up by a clear policy, consistent templates, and robust record-keeping, this approach ticks every compliance box, while also saving a significant amount of time.
The payoff
Whilst this approach might not be for everyone. Those who adopt it have seen real benefits.
It’s early days for this particular firm, but the anticipated time savings are huge.
Historically, these small withdrawals were a constant source of friction, eating into adviser diaries and delaying client access to funds. Now, the process is faster, cleaner, and still defensible from a regulatory perspective.
The MD’s view? “This will save us hundreds of hours of time a year, without increasing risk”.
Sounds pretty good to us.
Efficiency isn’t always about new systems or technology. Sometimes it’s about rethinking existing processes, removing the unnecessary steps and putting the right framework around the ones that matter.
When you create compliant speed increases in processes, everyone wins. Your clients get the outcome they want faster, and your team can focus on higher-value work.
Want to streamline processes without increasing risk?
Most processes grow arms and legs over time.
We can help you identify where you’re over-engineering, design compliant shortcuts and put the right policies and templates in place so your team can move faster with confidence.
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