Ultimately boards and senior management teams carry the responsibility for the governance of a company and relevant propositions/operations within the company. Typically, there will be a range of roles and committees in place, including risk management, to support boards and senior management teams in their governance work.
Each committee will have terms of reference in place and is likely to be populated with internal staff. Independent presence on a committee might occur sometimes, as might the undertaking of independent review of the committee’s working practice and effectiveness.
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.
