Advice firms should compile a requirement wish list for their MPS providers to help them evidence how they remain compliant with Consumer Duty, says Hymans Robertson Investment Services.
Regulators are increasingly looking for firms to show their working and clearly identify how they can make the operational decisions that impact their clients. Advice firms that lack the right information from their partners run the risk of making decisions that aren’t right for their client’s needs, HRIS warned.
According to the firm, top of advisers’ wish list should be evidence of scenario testing which looks at how portfolios could perform in a range of economic environments, followed by results from their ongoing assessments against their value for money framework scorecards.
In addition, advisers should ask providers to share evidence of testing client communications as well as documented CIP roles and responsibilities.
Lastly, advisers should demand documentation demonstrating how asset allocation, often the single largest driver of investment risk and return, was arrived at, the firm said.
Kate Rainbow, head of key accounts at Hymans Robertson Investment Services, said: “Advisers should not be afraid of looking outward to any partners they choose to work with to ensure they have all their bases covered for compliance. Despite the first anniversary of Consumer Duty being near, firms are still adjusting to the regulation and working out how it impacts their operations. There’s the chance for some that it could change their operations significantly. But it’s not just these firms that the regulator will scrutinise. They’ll want all IFAs to show their working and be able to fully evidence and explain why they have taken the investment decisions they have for their clients.”
Rainbow said advisers should look for providers that support due diligence.
“The Duty is clear that advisers should be undertaking and documenting appropriate due diligence of their MPS providers. Good providers will encourage and support this due diligence process, through openly sharing data and answering all questions as appropriate. This will help them create a working relationship that truly meets their needs and in turn enables them to deliver the best service possible and remain compliant,” she added.
