Eleanor Palmer, paraplanning technical consultant, Quilter PCA, looks at how the Regulator’s latest major policy statement affects the day-to-day work of paraplanners, with three recommendations for best practice.
The new FCA Consumer Duty paper will no doubt leave an indelible mark on the whole of the financial advice sector. Platforms, investment houses and financial advisers will need to make changes to the way they work to ensure they comply with the new regulations.
However, it’s easy to forget how these types of regulatory change impact paraplanners and other support staff. They too will need to show how good customer outcomes are being created, and given they are often deep in data and reporting it will be crucial they have effective processes in place.
There are several key points from the Consumer Duty that intersect with what any good paraplanner should be aiming for already and thus shouldn’t be too difficult to implement:
- Putting clients’ needs first, and focusing on the client outcome
- Avoiding presenting information in a way that is misleading or difficult to understand
- Avoiding causing foreseeable harm
- Considering needs, characteristics and objectives of customers (including characteristics of vulnerability), although everyone has a duty here.
Below are three tangible recommendations for best practice for implementing the new rules.
Check recommendations
A good starting point for paraplanners to help ensure that these outcomes and rules are adhered to is simply sense checking recommendations. By this, I mean focusing very clearly on ensuring that the client is getting the right outcome. This may involve exploring what is being recommended and checking how it meets the client’s needs. Just as importantly, paraplanners should ask themselves whether the recommendation represents fair value (i.e. is the cost of the product and service proportionate to the overall benefit the consumer will receive).
The FCA wants consumers to be sold products and services that are designed to meet their needs, characteristics and objectives. Paraplanners can be seen as the “first line of defence” in terms of risk to the business and its clients. If you don’t think a recommendation is in a client’s best interests, talk to the adviser. Obtain further information, clarify anything you’re unsure of – and challenge the recommendation, if you still think it doesn’t stack up.
The FCA rules describe acting in good faith as a “standard of conduct characterised by honesty, fair and open dealing, and acting consistently with the reasonable expectations of retail customers”. Aim for this in everything you do.
Use plain English
One of the major areas that paraplanners can help ensure the Consumer Duty is adhered to is by presenting information in a way that is straightforward and easy to understand. This might be as simple as using plain English and avoiding jargon. Anything client facing should be succinct and straightforward. Put yourself in your clients’ shoes – would you want to read the report you’ve just written? If not, why not? Interrogate your own writing.
Don’t forget to simplify and edit template wording
This focus on plain English should also be applied to template wording. Make sure you read suitability report templates as you’re writing. Don’t include template text that doesn’t apply to the client. Actively pay attention to the document as you’re working through it. The FCA’s rules and guidance on foreseeable harm doesn’t mean that firms can hide behind “ineffective disclosure” to say their customers had accepted a product or service’s inherent risks.
Well-written, client-friendly communications can go a long way to ensuring consumers are equipped with the right information to make informed decisions about their products and services. This includes suitability reports, as well as any other contact you may have with a client (either verbal or written).
The Consumer Duty changes will have a far-reaching impact and will be of consequence to all retail financial firms. What is exactly required will become clearer as the 160-page document is further digested over the coming weeks. However, for now, these three recommendations should help those in the support service and paraplanning community to start to implement some of the rules.
