How to carry out platform due diligence
- To understand what the FCA requires from due diligence.
- To learn what sort of questions advisers need to ask of clients.
- To ascertain which platforms will suit which clients.
- To understand what the FCA requires from due diligence.
- To learn what sort of questions advisers need to ask of clients.
- To ascertain which platforms will suit which clients.
Platform due diligence is one of those subjects which usually generates a great deal of debate and discussion.
Platforms are now so central to the vast majority of adviser firms, in all their glorious diversity, that it can be hard to separate out questions of platform due diligence from discussions about independence, investment management and service propositions.
We know that the financial services regulator, the Financial Conduct Authority (FCA) is interested in the due diligence that advisers undertake. However, principles-based regulation means that we are never going to be told exactly what to do, however frustrating that may feel in the short term.
Indeed, the FCA's Thematic Review on due diligence (TR16/1), Assessing suitability: Research and due diligence of products and services, was long awaited but concise.
In fact, the Thematic Review, which was published in February 2016, was just nine pages in length.
A second platform is likely to be more suitable for wealthy clients at retirement concerned about the tax efficient drawing down of income and capital.One thing that we can do is to take note of the comments that the regulator has made and study their examples of good and poor practice.
The FCA paper said: "In the main, we found that firms sought to achieve positive outcomes for their clients when undertaking research and due diligence, and generally firms demonstrated some good practice in this area.
"However, many firms did not show consistently good practice across all products and services. The poor practice we identified varied from issues that are easily addressed to those that are more significant.
"We were disappointed to identify issues relating to platform research and due diligence, particularly having previously published our expectations around this topic."
In light of this, we can think carefully whether our own approach would withstand scrutiny, or whether the regulator visiting our own firm might find the same failings, or indeed comment on the same successes.
Looking at what exactly due diligence is, the words of the City regulator offer the following: “the process carried out by the firm to assess (a) the nature of the investment, (b) its risks and benefits and (c) the provider (to establish whether they believe it appropriate to entrust the provider with client assets).”
A web search also describes due diligence as “an investigation … prior to signing a contract”, an “audit … to confirm all facts .. plus anything else deemed material” and “the care a reasonable person should take before entering into an agreement”.
