Advisers’ ability to meet the requirements of the Consumer Duty could be at risk if investment providers fail to provide them with regular transparent updates or operate with the rigour required, warns Hymans Robertson Investment Services.
In a briefing ‘Consumer Duty: getting what you need from your investment provider’, HRIS says advisers must have confidence in their outsourced parties’ investment processes and operational resilience.
According to the paper, advisers should look for stringent investment rigour from their provider and be sure any evidence clearly shows processes are being followed and that the firm’s primary focus is on enhancing retail customers’ outcomes.
The Consumer Duty builds on a number of regulations already in place but sets higher and clear standards of consumer protection across financial services, with the aim of delivering good outcomes for retail customers.
As the first deadline approaches for firms to have agreed implementation plans in place, William Marshall, chief investment officer at HRIS, said advisers should take note of key words ‘must’, ‘should’ and ‘may’ that run throughout the Consumer Duty guidance.
Marshall said: “The Duty’s scope is wide and designed to have a deep positive impact on end consumer outcomes. When reading the FCA’s Finalised Guidance on the Consumer Duty, advisers would be wise to take note of key words, these are: must, should, may. They’re important because they tell advisers the extent to which the FCA expects any relevant third parties to comply with the guidance. There are some significant ‘musts’ to which particular attention should be given because to achieve compliance with the Duty firms will need to evidence they are meeting these requirements.
“Advisers, for instance, must be aware of the needs of the target market, make sure the consumer understanding is strong and that value for money is being achieved.”
Marshall says that for some advisers, the process of evidencing the requirements of the Consumer Duty will mark an evolution of their current processes but for others it will require a substantial amount of information to be pulled together in a short period of time.
He added: “Having third parties who are able to demonstrate their alignment to the Consumer Duty and can evidence their own strong governance and reporting structures will be key to many advisers being successful in complying with the new guidance.”
