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.
Items including the following will therefore continue to come under the microscope:
- Are the fund/portfolio objectives and parameters clearly explained for the customer?
- Is the company marketing the product, fund or portfolio solution doing enough to make the investment charges, methodology, terms and conditions clear and transparent?
- For example, is the total cost of investment made clear rather than just headline charges being displayed?
- What asset/fund types are being used within portfolios? Is the asset mix being clearly explained to advisers/customers? Are their characteristics understood? Are they suitable for customer requirements?
Considering managed investment solutions
Having touched on some of the key areas where asset managers will need to enhance governance functions and processes, it is worth reflecting on the role and responsibilities of adviser businesses when engaging with managed investment solutions.
Research and due diligence requirements
In February 2016, the FCA published TR16/1: Assessing suitability: Research and due diligence of products and services, a report which set out the high-level findings of the FCA’s thematic review of the research and due diligence processes carried out by advisory firms on the products and services recommended by them to retail customers.
The review included, for example, exploring how:
- Firms selected products, funds, platforms and discretionary investment management services.
- Created panels and CIPs.
- Considered options for individual clients.
