Platform consultancy The Lang Cat has today (19 November) published its first white paper, containing nine questions advisers should ask of platforms both directly and indirectly in order to meet the due diligence requirements placed on intermediaries by the regulator.
The paper suggests three “belt and braces” questions advisers must ask of their platform provider:
• Do you or your associates receive any remuneration in respect of business issued post-RDR which could, in any sense, be construed to contravene the letter or spirit of Cobs as amended by PS13/1?
• Do you receive any form of remuneration from retail product providers?
• If so, how do you ensure this remuneration does not create bias in the way you present retail investment products on your platform?
Mark Polson, principal of The Lang Cat, said that by asking these questions, your platform provider will confirm in explicit terms that they do meet the standards required of them under Conduct of Business rules.
While the first question is a closed question, Mr Polson said the others counterbalance this and allow any platform that does receive remuneration from retail product providers the opportunity to to define their interpretation of the PS13/1 requirements and be transparent about how they are meeting them.
Mr Polson said: “The answers will go into your file of platform research, creating a consistent picture across the platforms with whom you place business. On the face of it, this may seem to satisfy your due diligence requirements around remuneration and product bias. But in practice we think it’s unlikely to be enough.
“With phrases such as ‘reasonable steps’ and ‘know or ought to know’ cropping up at various points in the Cobs amendments, should things get sticky it’s hard to imagine the FCA accepting ‘but they said so…’ as an absolute defence.”
He added to counter this, advisers must ‘stress-test’ the answers with their own experience and in the process indirectly ask the following questions:
• When you go online, are you directed towards certain investments, especially proprietary ones?
• Are adverts disproportionately eye catching compared to the rest of the webpage?
• Are all funds presented alphabetically, except for certain ‘focus’ funds?
• Is the process of choosing one particular route noticeably easier than other routes?
• Does your broker consultant/ contact point you towards certain wrappers/ funds?
• Is their remuneration affected by the retail investment products you choose on the platform?
Mr Polson said: “These are the questions you ask yourself - the aspects that may either make you uncomfortable in the context of Cobs 6.1E.9 and Cobs 6.1F.1, or confirm that all is as it should be.
“These are subjective, and personal judgement calls, but for any situation where you feel the answer to a question is ‘yes’ it is incumbent upon you to express concern to the platform and perhaps your compliance service provider. Again this should all be documented and filed for reference whatever the outcome.”