The regulator states products and providers should be examined regularly to ensure advisers are considering relevant products that fit into the scope of your service.
In relation to providers, Stephen Gazard, managing director of Sesame Bankhall Group, suggests using an independent research tool which takes into account key factors such as financial strength of the provider, charging structure, past performance and such like.
“You should avoid including meaningless provider information in your suitability reports, such as how long a provider has been in business, as it doesn’t add value to your recommendation.
“It is good to bring in your personal knowledge and experience in respect of service, location, availability of account managers and support from the providers too. To ensure completeness it would be good to see additional information such as levels of complaints against them, but that is not always freely available.”
For research relating to products, Mr Gazard says this would need to be completed on a consumer-specific basis in terms of product features matching the needs and objectives of the consumer, taking into account things like minimum and maximum terms, penalties, charges, investment amounts, taxation, risk and so on.
If an adviser moves into offering more complex products, the FCA states in its ‘One minute guide to Due Diligence’ that you must update your fact find to collect more information and that advisers must have appropriate management information in place to monitor advice given for new or higher risk products.
Rebecca Prestage, head of policy of The Consulting Consortium, states advisers should have a clear process and structure to researching products and they should make sure that this is clearly evidenced, recorded and kept up to date.
“Advisers should also be aware of how funds are managed – passive/active, asset classes, rebalancing frequencies and performance history. Due consideration should also be given to platforms and tax wrappers, as well as product charges and costs, and any platform charges and costs.”
For non-mainstream investments, Ms Prestage said advisers should be confident of the reputation and financial standing of the provider of the products.
“Companies House can provide valuable information regarding a company’s financial strength and financial accounts, and research must be conducted on the company as well as the product.”
Some firms operating under a restricted model could have their options limited by working from a panel, which would reduce the due diligence burden, but this only really applies to large firms or those with the support of a network or service provider, according to Simon Thomas, head of policy for Tenet.
He adds that there are a number of useful tools available to assist advisers needing to research the products available in the market, such as Defaqto and Synaptic.
“Employing a paraplanner is also very effective, or buying the service in. When giving independent advice on retail investment products, advisers should ensure their research satisfies the requirements for conducting a comprehensive review of the relevant market of products.”
