Assessing suitability: Research & Due Diligence
Description: Assessing suitability: Research Due Diligence (RDD) 1 Agenda Why look at RDD? Thematic Review What we did Key findings Areas for consideration (including goodpoor practice) Key takeaways and next steps 2 Why look at RDD? What is the
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slide1. Assessing suitability:
Research & Due Diligence
(R&DD) 1<br>
slide2. Agenda Why look at R&DD?
Thematic Review
What we did
Key findings
Areas for consideration (including good/poor practice)
Key takeaways and next steps 2<br>
slide3. Why look at R&DD? What is the purpose of R&DD?
Understanding recommended solutions
Funds/products/services
Two fundamental questions
Why are we interested R&DD?
- A root cause of unsuitable advice
- To understand firms’ approaches 3<br>
slide4. What we did Pre-consultation
13 Advisory firms
3 Provider firms
7 Third party consultancies 4<br>
slide5. Key findings Majority of firms demonstrated elements of good practice
Often not replicated across the entire approach
Importance of culture of challenge 5<br>
slide6. Criteria for selecting an investment solution Prescription
Various criteria used for selecting investment solutions
Link to customer needs and objectives
Review of criteria 6<br>
slide7. Assessing risks Volatility
Various factors to consider including:
Risks of underlying investment
Product structure & complexity
Presence/Absence of protections
Fact vs opinion
Familiarity with product/provider/assets 7<br>
slide8. Provider due diligence Provider’s ability to continue providing the service:
Financial strength
Commitment to the market
Broad understanding of firm’s position
Entrusting the firm with client money 8<br>
slide9. Platform due diligence Is it appropriate to recommend a platform?
Criteria for the platform
Objective approach rather than ‘retro-fitting’
Does the platform:
Only receive remuneration permitted by the rules?
Present retail investment products without bias? 9<br>
slide10. Expertise Skills, knowledge & expertise
Outsourcing to a third party
Competence of the third party
Cannot delegate responsibility for suitability 10<br>
slide11. Implementation Effective communication of R&DD results throughout the firm
Alerts
Training/guidance 11<br>
slide12. Ongoing reviews Constant change
Structure of markets
Proposition offerings
Your client banks
Revisit and refresh
Periodic reviews vs ad hoc reviews 12<br>
slide13. Key takeaways Culture of challenge
Revisit & refresh
Size doesn’t matter
TR16/1
Assessing suitability web-page
Watch this space 13<br>
slide14. South West – March 2016Â
Northern Ireland – April 2016
North East – May 2016Â
East Midlands – June 2016Â
Wales – July 2016Â
Scotland – September 2016Â
East Anglia – October 2016Â
West Midlands – November 2016
London – December 2016Â
Yorkshire and the Humber – January 2017Â
South East – February 2017Â
North West – March 2017 14 https://www.fca.org.uk/events/roadshows/fca-live-and-local<br>
slide15. QUESTIONS? 15<br>
Research & Due Diligence
(R&DD) 1<br>
slide2. Agenda Why look at R&DD?
Thematic Review
What we did
Key findings
Areas for consideration (including good/poor practice)
Key takeaways and next steps 2<br>
slide3. Why look at R&DD? What is the purpose of R&DD?
Understanding recommended solutions
Funds/products/services
Two fundamental questions
Why are we interested R&DD?
- A root cause of unsuitable advice
- To understand firms’ approaches 3<br>
slide4. What we did Pre-consultation
13 Advisory firms
3 Provider firms
7 Third party consultancies 4<br>
slide5. Key findings Majority of firms demonstrated elements of good practice
Often not replicated across the entire approach
Importance of culture of challenge 5<br>
slide6. Criteria for selecting an investment solution Prescription
Various criteria used for selecting investment solutions
Link to customer needs and objectives
Review of criteria 6<br>
slide7. Assessing risks Volatility
Various factors to consider including:
Risks of underlying investment
Product structure & complexity
Presence/Absence of protections
Fact vs opinion
Familiarity with product/provider/assets 7<br>
slide8. Provider due diligence Provider’s ability to continue providing the service:
Financial strength
Commitment to the market
Broad understanding of firm’s position
Entrusting the firm with client money 8<br>
slide9. Platform due diligence Is it appropriate to recommend a platform?
Criteria for the platform
Objective approach rather than ‘retro-fitting’
Does the platform:
Only receive remuneration permitted by the rules?
Present retail investment products without bias? 9<br>
slide10. Expertise Skills, knowledge & expertise
Outsourcing to a third party
Competence of the third party
Cannot delegate responsibility for suitability 10<br>
slide11. Implementation Effective communication of R&DD results throughout the firm
Alerts
Training/guidance 11<br>
slide12. Ongoing reviews Constant change
Structure of markets
Proposition offerings
Your client banks
Revisit and refresh
Periodic reviews vs ad hoc reviews 12<br>
slide13. Key takeaways Culture of challenge
Revisit & refresh
Size doesn’t matter
TR16/1
Assessing suitability web-page
Watch this space 13<br>
slide14. South West – March 2016Â
Northern Ireland – April 2016
North East – May 2016Â
East Midlands – June 2016Â
Wales – July 2016Â
Scotland – September 2016Â
East Anglia – October 2016Â
West Midlands – November 2016
London – December 2016Â
Yorkshire and the Humber – January 2017Â
South East – February 2017Â
North West – March 2017 14 https://www.fca.org.uk/events/roadshows/fca-live-and-local<br>
slide15. QUESTIONS? 15<br>