Assessing suitability: Research & Due Diligence

Transcript:Assessing suitability: Research & Due Diligence:
Assessing suitability: Research & Due Diligence (R&DD) 1 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 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 What we did Pre-consultation 13 Advisory firms 3 Provider firms 7 Third party consultancies 4 Key findings Majority of firms demonstrated elements of good practice Often not replicated across the entire approach Importance of culture of challenge 5 Criteria for selecting an investment solution Prescription Various criteria used for selecting investment solutions Link to customer needs and objectives Review of criteria 6 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 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 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 Expertise Skills, knowledge & expertise Outsourcing to a third party Competence of the third party Cannot delegate responsibility for suitability 10 Implementation Effective communication of R&DD results throughout the firm Alerts Training/guidance 11 Ongoing reviews Constant change Structure of markets Proposition offerings Your client banks Revisit and refresh Periodic reviews vs ad hoc reviews 12 Key takeaways Culture of challenge Revisit & refresh Size doesn’t matter TR16/1 Assessing suitability web-page Watch this space 13 South West – March 2016 Northern Ireland – April 2016 North East – May 2016 East Midlands – June 2016 Wales – July 2016 Scotland – September 2016 East Anglia – October 2016 West Midlands – November 2016 London – December 2016 Yorkshire and the Humber – January 2017 South East – February 2017 North West – March 2017 14 https://www.fca.org.uk/events/roadshows/fca-live-and-local QUESTIONS? 15