An investment manager has warned that advisers’ ability to fully comply with the FCA’s new Consumer Duty will be in jeopardy if their investment providers fail to provide them with regular and transparent updates.
As the first deadline of the new guidance looms this month, Hymans Robertson Investment Services (HRIS) has warned that advisers face many challenges in complying with the new rules.
HRIS says a key doubt is whether investment managers can provide sufficient information to advisers to help them meet the new rules.
Other experts have also expressed concern about the ability of fund managers to provide sufficient information to advisers to enable them to meet the requirements.
The FCA’s new Consumer Duty has its first implementation deadline at the end of October with the full rules applying from July for existing products and 2024 for legacy products.
The FCA said that while it does not expect advice firms to have fully embedded the Duty by the end of this month, it does expect them to be able to provide evidence that their plans are sufficiently developed to be fully implemented by July.
Under the new Consumer Duty rules, firms will be expected to, “put consumers at the heart of their business and focus on delivering good outcomes for customers.”
They must also provide products and services that are designed to meet customers’ needs, that they know provide fair value, that help customers achieve their financial objectives and which do not cause them harm.
The FCA said recently that financial advisers and providers should not underestimate what will be expected of them under the new Consumer Duty. The regulator said the Duty will be a ‘significant shift’ in what it expects of advice firms.
To help advisers HRIS has published a briefing document, Consumer Duty: getting what you need from your investment provider, to highlight the key parts of the FCA’s Consumer Duty for advisers, including that advisers must have confidence in their outsourced parties’ investment processes and operational resilience.
The paper also outlines what advisers should expect to see from outsourced investment management solutions. The briefing focuses on model portfolios used by many advisers. It also draws attention to the need for advisers to be sure any evidence clearly shows processes are being followed and that the firm’s primary focus is on enhancing retail customers’ outcomes.
Advisers need to be diligent when gathering evidence from third parties, the firm said.
William Marshall, chief investment officer of Hymans Robertson Investment Services, said: “The Consumer Duty is here, and its first deadline is already looming. The Duty’s scope is wide and is 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 that run throughout the document, these are: must, should and 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.
“For some advisers, the process of evidencing the requirements of the Consumer Duty may represent an evolution of their current processes; however, for others, there will be a substantial amount of information to pull together in a short period. So having reliable 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.”
