Often, however, customers and advisers will not be aware of the work of these committees. This may change over time because of the general move towards enhanced transparency in the industry.
A light being shone on asset managers via FCA market study
The regulator has now published the final findings of its Asset Management Market Study and announced the package of remedies it will take forward to address the concerns identified in its interim report into the sector.
Advisers should be aware of this body of work, including areas for investigation, and keep themselves abreast of associated regulatory or market developments. Advisers should also note that as part of the asset management study the FCA’s latest with profits review project has begun with the submission of an information request to with profits firms.
Asset managers will therefore continue to come under pressure in terms of making their objectives, terms, conditions and performance clearer to customers.
Mifid II turns up the dial on product governance
The incoming Markets in Financial Instruments Directive II (Mifid II) is introducing significant product governance requirements and hence, whether directly or indirectly impacted, companies across the UK financial services sector should consider their approach and processes when designing and distributing products/funds in future.
The overarching aim for this work, as ever, should be to achieve best practice within these companies and to target positive outcomes for customers in a transparent manner.
There is a range of considerations when reflecting on these governance requirements, including:
- Better acquisition and demonstration of knowledge and intelligence relating to a company’s target customers and their requirements.
- When designing and testing appetite for new products/funds, companies should carry out quantitative and qualitative market research exercises to ascertain customer objectives and requirements.
- Having established customer objectives and requirements, and launched a new product/fund, companies need to ensure these solutions are going to the right customers.
- This will require detailed management information (MI) and reporting capability. Companies will need to investigate and report instances where their products/funds are not being used by the right customer.
It may be more straightforward when ascertaining the above where the company has a direct relationship with the customer, but given that many products/funds are distributed via intermediaries and third parties (such as platforms), companies will also need to enhance their MI and reporting capability in relation to distributors.
Indeed, the exchange and flow of data and information between companies, intermediaries and third parties will need to get better and be more comprehensive to help each party meet their respective requirements.
While much of the product/fund governance process might have previously focused on pre- and at-launch activities, there will be a greater requirement for this governance and associated reporting to follow the product lifecycle and to continue to test rationale relating to product/fund fit for customers.
Companies will be held accountable for product governance processes and associated activities, reporting etc, and so senior management teams need to ensure governance is embedded in internal processes with relevant and appropriate levels of resource and expertise.
Clear requirement for good outcomes
Taking into account all of this activity, there is now a concerted focus within the industry on ensuring that customers receive suitable recommendations and achieve good outcomes. Within this, the clarity and transparency of terms and conditions for investment and pension propositions will be key watchwords.